Sweden’s debt office will probably stick to its latest issuance targets as Europe’s crisis eases, according to three of Scandinavia’s biggest banks.
The debt office in Stockholm is likely to repeat its target for nominal bond sales of 74 billion kronor ($11.7 billion) for this year, according estimates compiled by Bloomberg from Danske Bank A/S, SEB AB and Nordea Bank AB. Issuance will rise to 84 billion kronor in 2014, also unchanged from the office’s previous goal, the banks said. Swedbank AB sees sales rising to 78.5 billion kronor in 2013 and 88 billion kronor next year.
Europe is showing signs of surfacing from the darkest hours of its debt crisis, reducing demand for the safest assets as investors return to higher-yielding markets. A recovery in the euro area also bodes well for export-reliant nations such as Sweden, reducing the need for additional funds to pay for more stimulus.
The yield on Sweden’s benchmark bond traded at 2.035 percent today, compared with as low as 1.13 percent in June last year.
Sweden’s $500 billion economy will expand 1.2 percent this year, from 0.9 percent in 2012, as households grow more optimistic, the central bank said this month. The bank kept its main lending rate unchanged at 1 percent.
Unemployment and household spending “look like they will end up roughly in line with the debt office’s previous prediction,” said Michael Bostroem, chief analyst at Danske Bank A/S in Stockholm.
In its October forecast, the debt office predicted household spending would grow 2.1 percent this year. Unemployment would rise to 7.9 percent in 2013, before easing to 7.6 percent in 2014, it said. Seasonally adjusted unemployment was unchanged at 8 percent in January from the month before, the statistics office said today.
“They will have to revise down their outlook on the labor market a bit and perhaps growth somewhat,” Knut Hallberg, an analyst at Swedbank in Stockholm, said by phone yesterday. “That results in slightly lower revenue and higher labor market expenses.”
The central bank in December said it will need to increase its foreign reserves by 100 billion kronor to create a buffer against bank industry foreign borrowing. The bank said then the move was necessary to guard against the “uncertain situation” in the global economy.
“The big change to the forecast is that they will have to incorporate the borrowing on behalf of the Riksbank as it raises its currency reserve,” said Mats Hyden, chief analyst at Nordea Bank AB in Stockholm. “This is well-known by the market.”
The debt office may also comment on the government’s 13.5 percent stake in Nordea, the bank wrote in a note last week. The Nasdaq OMX index of the 30 most-traded companies on the Stockholm bourse has gained 7.7 percent this year. Nordea shares have added 19 percent in that time.
“The stronger the stock market becomes the better it is to sell their assets and Nordea would then be first in line,” said Hyden. “We believe that there is a chance of that, even if it’s not our main scenario.”
The updated debt office forecasts will be released tomorrow at 9:30 a.m. in Stockholm.