Quarterly report on Local Government Debt Management: Average interest rate falls for third 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 first quarter of 2025 includes 9,406 loans, certificates and bonds for a total amount of SEK 695 billion, and 1,623 financial derivatives corresponding to SEK 202 billion.

The average interest rate in the sector decreased by 6 basis points during the quarter, from 2.38 to 2.32 percent. The average capital maturity was 2.39 years and 30 percent of the debt matures within 12 months. The average interest rate maturity, including derivatives, was 2.62 years.

Many municipalities, regions and municipal companies finance their investments with relatively short capital and interest tie-ups. The capital and interest duration for the sector has varied in recent years, but remains below three years on average.

The interest rate on new business, including derivatives, was 2.69 percent. The interest rate fixation period on new business was 2.13 years and the capital fixation period was 2.71 years. Despite the higher cost of new borrowing, the average interest rate for the overall debt portfolio continued to fall.

– The fact that the average interest rate is falling even though the rate on new business is higher than the current average may seem counterintuitive. But the explanation lies in the transactions that mature and are replaced. In particular, the floating rate is lower than in the previous quarter, which quickly affects the rate on floating-rate loans. For a correct analysis of the development, it is important to compare what matures with what is added, says Viktor Johansson, analyst at Kommuninvest.

In fixed-rate transactions, both the maturity and the timing of when the loan was entered into matter. Some maturing loans carry low interest rates from before the 2022 rate hikes, while others have high rates from the 2023 peaks. The combination of these factors determines the net effect of the quarter’s maturing debt on the average interest rate.

Local Government Debt Management Q1 2025

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 70 266 87 26
e-mail: victoria.preger@kommuninvest.se