The duration of the nominal debt
According to the Government's guidelines for central government debt management in 2005, the benchmark for the average duration of the nominal component of the central government debt is to be lowered from 2.7 to 2.5 years. This is justified by the state being able to achieve lower borrowing costs in the long term by borrowing at slightly shorter maturities in nominal krona and foreign currency debt without increasing the risk to too great an extent.
The Debt Office may decide on targets that result in the average duration of the nominal debt deviating by a maximum of 0.3 years from the benchmark. A decision to deviate is to be based on assessments of the current interest-rate situation in relation to the long-term interest-rate development. In the Debt Office's opinion this relation cannot at present justify a deviation from the Government's benchmark.
The Debt Office has decided that the benchmark for the average duration of the nominal debt is to be achieved by a target of 2.8 years for the duration of the krona debt and 1.8 years for the foreign currency debt. The adaptation to the new target for the krona debt is to take place gradually during the year. The adaptation for the foreign currency debt is to take place during the first quarter of 2005.
The foreign currency debt
The Government has decided that the foreign currency debt is to be reduced in the long term from the current 25 per cent to 15 per cent of the central government debt. This is mainly because the foreign currency debt is associated with a higher risk than the nominal krona debt. The Government has decided that SEK 25 billion per year of the foreign currency debt is to be amortised next year and also preliminarily for the coming two years. The Debt Office can deviate by ± SEK 15 billion around this benchmark if it is justified by considerations of cost and risk. At present, the krona exchange rate is within an interval that seems reasonable in a longer perspective. The Debt Office therefore considers that amortisation is to be made in accordance with the Government's target value of SEK 25 billion.
Inflation-linked bonds
The Government has decided that the percentage of inflation-linked bonds in the central government debt is to increase in the long term from 15 to 20-25 per cent of the central government debt. No exact target has been specified, however, for the rate of increase in 2005. In 2004, in the judgment of the Debt Office, the issue volume of inflation-linked bonds will total just under SEK 20 billion. If demand continues at the current level, the Debt Office makes the assessment that there will be scope to continue with the same pace of issuance in 2005.
For additional information, please contact:
Charlotte Lundberg, Head of Debt Management,
tel: + 46 8 613 46 47
Gunnar Forsling, Head of Analysis,
tel: + 46 8 613 45 35