Main points in the December forecast
1. The net borrowing requirement for 2015 has been raised by SEK40bn to SEK51bn. The reason is slower economic recovery and higher cost for migration due to ongoing fighting in Middle East. The first forecast for 2016 shows net borrowing of SEK13bn.
2. The supply in nominal SEK bonds is unchanged at SEK77bn for 2015 and 2016. In index-linked bonds it is SEK18bn (same as June forecast) this year and the same volume in 2016.
3. The higher borrowing requirement is covered primarily by more borrowing in bonds denominated in foreign currencies.
4. Due to the higher borrowing requirement, the Debt Office plans to reduce the amount of auctions in the 10-year segment and increase in the five-year segment compared with the June projection (no figures mentioned).
5. The forecast for receiver volumes in SEK interest rate swaps has been lifted by SEK5bn next year (from SEK25 to SEK30bn).
6. The new index-linked bond (SGB IL 3110), maturing 1 June 2019, will be introduced on 5 February - switches with SGB IL 3107 (maturing 1 June 2017) will be offered. A new IL bond with maturity in 2032 is intended to be introduced in the spring in a syndication (switch with the 2028 SGB IL 3104).
Assessment
Points 4 and 6 combined suggest less risk to the markets than previously suggested by the June Debt office forecast and should be supportive of a 5/10-year flattening of the government curve over time.
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