Quarterly report on Local Government Debt Management: Average interest rate to fall for the first time in three years

The report is based on Kommuninvest's lending and transactions registered by municipalities and regions, as well as their companies. Data is retrieved from Kommuninvest's debt management tool KI Finans. The basis for the third quarter of 2024 includes 9,605 loans, commercial paper and bonds totaling SEK 669 billion and 1,618 financial derivatives corresponding to SEK 200 billion. For the first time since 2021, the average interest rate in the sector decreased. The average interest rate decreased by 10 basis points from the previous quarter, from 2.55 to 2.45 percent.

- The decrease in the average interest rate for the sector has been expected because of lower rates on new transactions over the last 12 months. However, the exact quarter for the decrease has been unknown. Nonetheless, the decrease is a clear indication that lower market rates are quickly impacting municipal lending costs, says Viktor Johansson, analyst at Kommuninvest.

The average tied-up capital in the third quarter was 2.33 years, which is a decrease from the previous quarter, which was 2.46 years at the time. The average fixed interest rate, including derivatives, in the third quarter was 2.61 years, which is a decrease from the previous quarter, which was 2.65 years at the time.

The average interest rate on new deals, including derivatives, decreased to 2.91 percent in the third quarter of the year, compared with 3.49 percent in the previous quarter. The fixed interest period on new transactions was 3.8 years, clearly higher than the average fixed interest period on all transactions.

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 now steadily decreased over the last four years and can now be compared with the levels that existed around 2016.

Local Government Debt Management Q3 2024

For further information:

Viktor Johansson, Analyst, phone: +46- 010 470 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