Sweden Explores Issuing Bonds as Long as 100 Years
(Bloomberg) -- With much of its yield curve trading below zero, Sweden is now exploring whether to join other countries such as Austria and lock in historically low borrowing costs for as long as a century.
The Nordic nation’s longest bond, which has a yield around zero, needs to be paid back in 2039. All its other debt trades at negative rates, along with more than $16 trillion in fixed-income securities worldwide.
“The prospect of locking in what appear to be exceptionally low interest rates for the long term is interesting and worth looking into,” Debt Office Director General Hans Lindblad said in a statement late on Tuesday. The agency will first analyze “several aspects,” including how it would affect its funding patterns, and whether there’s demand, he said.
Sweden has one of the smallest debt burdens in Europe, at around 35% of gross domestic product. That’s roughly half the average in the European Union. Almost half Sweden’s government bonds are currently held by the central bank, which has been buying debt since early 2015 as part of a stimulus program.
The agency said it will return with its evaluation on Oct. 23, when it issues its next borrowing forecast. A spokeswoman said by phone that it wouldn’t comment further on Tuesday’s statement.
Deviating from the on-the-run maturities could imperil an already strained liquidity situation. Neighboring Finland has warned against issuing ultra-long bonds, citing the need to maintain liquidity in existing maturities.
SEB AB said in a note Wednesday morning that the timing of the announcement was “somewhat surprising” given that borrowing has been reduced in all instruments and that the government has decided to issue green bonds by 2020.
Some European issuers including Germany have watched yields across all maturities go negative. Investors are eating the losses amid fears the global economy may be headed for a recession as trade tensions escalate and central banks respond with more stimulus.
Investors chasing ultra-safe bonds yielding more than 1% turned to European sovereigns in recent years, though only a handful such as Belgium and Ireland have extended maturities to one century. Austria sold 1.25 billion euros ($1.4 billion) of 100-year debt in late June.
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