Quarterly report on Local Government Debt Management: Average interest rate falls for second quarter in a row

The report is based on Kommuninvest's lending and transactions registered by municipalities and regions, as well as their companies in Kommuninvest's debt management tool KI Finans. The data for the fourth quarter of 2024 includes 9,155 loans, certificates and bonds for a total amount of SEK 685 billion and 1,632 financial derivatives corresponding to SEK 202 billion.

The average interest rate continued to decline in the sector this quarter. The average interest rate decreased by 7 basis points compared to the previous quarter to 2.38 percent. The average capital maturity was 2.48 years and 27 percent of the debt matures within 12 months. The average interest rate maturity including derivatives was 2.72 years.

- The floating rate saw a sharp decrease before and during the last quarter of 2024. This together with a relatively significant amount of the loans tied to a floating rate has seen the average interest rate in the sector decrease. Several swap rates has also decreased over the last year, contributing to the effect. A recent projection of the average interest rate in the sector does however point toward higher lending costs over the following years. There are still loans and derivatives yet to transition to the new, higher rates. The projection forecasts the average interest rate in the sector to be around 3 percent by 2028, says Viktor Johansson, analyst at Kommuninvest.

The average capital tied up in the Swedish municipal sector is short, 2.48 years at the end of the fourth quarter, which is an increase from the previous quarter when it was 2.33 years. This means that investments are financed with borrowing that is renewed several times during the economic life of the investment.

The average interest rate on new business decreased to 2.62 percent compared to 2.91 percent in the previous quarter. The interest rate fixation period on new business also decreased to 3.26 years, including derivatives, compared to the previous quarter of 3.8 years. The capital fixation period on new business in the fourth quarter of 2024 was 3.21 years.

Many municipalities, regions and municipal companies finance their investments with loans that have relatively short capital and interest tie-ups. The capital and interest period for the sector has steadily decreased over the last four years, but saw an increase over the last quarter.

Loval Government Debt Management Q4 2024

For further information:
Viktor Johansson, Analyst, phone: +46 10 470 87 67
e-mail: viktor.johansson@kommuninvest.se
Victoria Preger, Chief Communication Officer, phone: +46 702 66 87 26
e-mail: victoria.preger@kommuninvest.se