Sweden Sticks to Bond Sales Target After Europe Crisis Ebbs

Sweden held to its target for this year’s bond sales as the export-dependent economy is showing signs of recovering from the European crisis.

Sweden plans to issue 74 billion kronor ($11.8 billion) of nominal bonds this year, matching its October estimate, according to a statement by the National Debt Office today. The agency will sell 84 billion kronor in bonds in 2014, also in line with its previous projection.

“The state’s finances hold up very well from an international perspective,” Director General Hans Lindblad said at a press conference in Stockholm. “A small, open, export-reliant economy like Sweden is of course affected by developments abroad.”

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 Sweden, which sells about half of its output abroad. Its central bank kept the main lending rate unchanged at 1 percent this month.

The yield on Sweden’s 4.5 percent two-year note rose 2 basis points to 1.14 percent, the highest since April 2, at 2:18 p.m. in Stockholm.

Planned Auctions

Nominal bond auctions will remain at 3.5 billion kronor each and no auctions in longer maturities are planned, the debt office said today.

Growth in the Nordic region’s biggest economy will accelerate to 1.4 percent this year and 2.4 percent in 2014, compared with 0.7 percent in 2012, the debt office said. Unemployment will rise to an average 8.2 percent this year before easing to 8 percent in 2014.

Sweden’s central government will post a budget deficit of 165 billion kronor this year and 63 billion kronor next year compared with its October deficit forecasts of 55 billion kronor and 56 billion kronor, respectively, the agency said.

Sweden will sell 416 billion kronor of debt this year, of which 130 billion kronor will be in Treasury bills. It will issue 12 billion kronor of inflation-linked bonds in 2013, up from a previous estimate of 9 billion kronor and boost foreign-currency borrowing to 137 billion kronor from a previous estimate of 50 billion kronor.

The central bank said in December it will need to increase its foreign reserves by 100 billion kronor to create a buffer against the banking industry’s foreign borrowing. The bank said then the move was necessary to guard against the “uncertain situation” in the global economy.

“The bulk part of the increase is in foreign currency due to the on-lending to the Riksbank’s foreign-exchange reserve,” it said. The office has so far borrowed 78 billion kronor of the funds it needs to raise on behalf of the Riksbank and may complete the borrowing as early as today, Thomas Olofsson, head of debt management at the agency, said at the press conference.

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