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By John Geddie
LONDON, Nov 20 (IFR) - The Kingdom of Sweden is set to issue
its last foreign currency bond of 2013 on Wednesday, capping off
a year where it is has raised a larger than expected volume to
bulk up its central bank's foreign currency reserves.
The Nordic sovereign, rated Aaa/AAA/AAA, is gathering orders
for a new EUR1bn no-grow three-year bond, a deal which will
bolster its reserves in case its ability to fund deteriorates.
"If everything goes well it is fair to assume this will be
Sweden's last foreign currency bond issue in public markets this
year," said Maria Norstrom, the head of funding at Sweden's debt
office, which on-lends the proceeds to the central bank.
Sweden is offering the bonds with a fairly expensive price
tag because of the issue's relatively small size.
This contrasts with its larger USD3bn issue of the same
maturity issued back in August, which was deemed to have paid a
fairly generous new issue premium to investors.
Lead managers Barclays, CA-CIB and Danske opened order books
on its latest bond sale on Wednesday morning with guidance at
mid-swaps minus 27bp area, which at current market rates is
equivalent to a yield of just 0.36%.
Fair value calculations also suggest the new deal is coming
through Sweden's outstanding euro bonds in the secondary market.
Sweden's 0.625% Feb 2015 and 0.875% Jan 2018 bonds were bid
at mid-swaps minus 27.8bp and 23.9bp respectively on Wednesday
morning, placing fair value on the November 2016 issue at
mid-swaps minus 25.5bp.
The deal is also set to price through Triple A rated World
Bank's EUR1bn 0.375% December 2016 bond, which was issued two
weeks ago at mid-swaps minus 28bp but is currently bid at minus
25.6bp, according to Tradeweb.
The bond is expected to price later on Wednesday but the
aggressive pricing level may not sit well with investors, who
have shown stronger demand for riskier assets as Europe's
outlook has improved and after the European Central Bank cut
interest rates two weeks ago.
Sweden this year so far has issued foreign currency bonds
equivalent to SEK128bn (USD19.33bn) via public issues,
commercial paper and private placements - leaving it with just
SEK13bn to hit its expected SEK141bn target.
In 2012, it issued SEK112bn in foreign currency bonds, and
expects to raise SEK60bn in 2014, the debt office stated in its
latest Central Government Borrowing forecast.
(Reporting by John Geddie, Editing by Anil Mayre)