UPDATE 1-Sweden begins to tackle foreign currency funding needs

Thu Jan 24, 2013 11:02am EST

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(Adds guidance, funding requirement, background)

By John Geddie

LONDON, Jan 24 (IFR) - Sweden mandated banks for a five-year euro bond on Thursday, as the country gets started on plans to strengthen its foreign currency reserves.

The Kingdom, rated Aaa/AAA/AAA, hired Danske Bank, Goldman Sachs International, J.P. Morgan and Royal Bank of Scotland as joint lead managers for the planned bond issue, just days after its central bank ordered the debt office to raise an extra SEK100bn (USD15.4bn) in international capital markets in 2013.

Guidance on the new bond has been set at mid-swaps minus 18-20bp, banks managing the deal said.


The additional funding requirement means Sweden now has to issue SEK160bn in foreign currency debt in 2013 - likely to be in euros or US dollars - which is a sizable increase on the SEK112bn issued in 2012.

Initially, the country forecast it would only have to raise around SEK60bn this year through commercial paper and foreign currency bonds.

But on Tuesday, Sweden's central bank, known as the Riksbank, announced plans to bolster its reserves in case its ability to fund deteriorates.

Following the Riksbank's announcement, the debt office subsequently revised its funding forecast to reflect a new total gross borrowing requirement of SEK403bn.


The debt office has already voiced its opposition to the precautions taken by its central bank.

"The National Debt Office's opinion, however, is that it is wrong that a decision by a public authority can increase the government debt by three digit billion amounts without a clear framework. This decision-making undermines the parliament's control over the government finances," said debt office director general, Bo Lundgren, on Tuesday.

" the National Debt Office does not share the Riksbank's concerns that our ability to fund may deteriorate."

Sweden's last international bond issue was back in October 2012, when it launched a USD1bn three-year bond that priced at the tightest spread to Treasuries for an SSA issuer all year.

Barclays, Citigroup and Deutsche Bank priced the 0.375% December 2015 bond at mid-swaps minus 7bp, equivalent to just 4.75bp over the October 2015 Treasury, on the back of USD1.5bn of orders. (Reporting By John Geddie, editing by Natali Harrison, Julian Baker)


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