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Sweden looks to diversify borrowing with more domestic borrowing |
Unlike many of the other sovereigns Euromoney spoke to, Sweden is looking to cut the role of internationally syndicated deals in its funding programme, after using the market unusually heavily in 2002. Erik Thedéen, deputy director general of the Swedish national debt office, says: “Our foreign debt is around 30% of the total – our strategy is to decrease that amount. Last year we had a pause in that schedule due to the weak Swedish krona, and did a lot of internationally syndicated deals, but that will change in 2003. Like every issuer, we want to diversify our investors, but we’d like to do that with our domestic debt.”
Of the expected SKr130 billion ($15 billion) yearly funding requirement, just SKr5 billion is expected to be raised in foreign currency.
After being upgraded to AAA by Moody’s in the spring, Sweden found considerable success with its three dollar benchmarks in 2002, particularly its $1.25 billion 2005 issue in May. Thedéen says the small, highly rated sovereign’s paper has benefited from its rarity value. Conventional wisdom might argue that targeting two large issues at the three-year segment within a single year is an odd choice but Thedéen simply points out that this was where the most attractive swapped cost of funds was at the time. Despite this success, though, large benchmarks look set to be less attractive this year. “Our international issuance is cost-driven. In 2003 we are more likely to go for smaller, aggressively priced deals rather than the big benchmarks we did last year.”
Inflation-linked bonds are another area Thedéen expects to focus on more in 2003. But he does not foresee any forays into French-style eurozone inflation bonds. He says: “We want to support inflation-linked bonds, and spread the news that the Swedish index-linked market is one of the biggest in the world. But any issues we do will probably only be indexed to Swedish CPI. We collect taxes in Sweden so we’re exposed to Swedish inflation.”
The referendum on joining the eurozone in September will be the crucial issue for Sweden this year, though, and could create profound changes in its debt strategy. Thedéen says: “If it is a yes, then clearly cultivating a wider European investor base will become more important, since our domestic investors will start to move into other markets.”
This time next year, Sweden could already have set off down the path already trodden by most of the other sovereigns profiled here. Or it could still be pursuing its own slightly unorthodox but effective strategy.
