The Swedish National Debt Office is raising the premiums for repos within the framework of our market commitment by 10 basis points. The following premiums apply from 1 April next year: A deduction of 40 basis points will be made from the Riksbank's repo rate for repos in nominal government bonds. The deduction will be 25 basis points for T-bills and 20 basis points for inflation-linked government bonds. We are also adjusting the terms for repo swaps.
Repos enable our primary dealers to borrow government securities from us. This is done on request regardless of our cash financing requirements, the intention being to reduce the risk of shortage situations in the market for government securities. The repos are offered in return for a fixed premium in relation to the Riksbank's repo rate. The premium means that repos with the Debt Office are normally an expensive alternative for the primary dealers.
The Debt Office reduced the premium in June 2005 in the light of the Riksbank having then lowered its repo rate in several steps. Now that the repo rate has been raised, we consider that some increase of the premiums is justified. The strong demand for repos with us since the early autumn also indicates that there is some scope for a rise. This increase can also be viewed as a clarification that our market commitment is intended as a last resort for the market participants.
We are also making an adjustment of the premiums in repo swaps and a change of the volume limitations in these. It will also be possible to make repo swaps between different government securities. Repo swaps are exchanges in government securities with repurchase agreements. The deduction for repo swaps in nominal government bonds will be 30 basis points from the Riksbank's repo rate. The deduction will be 15 basis points for T-bills and 10 basis points for inflation-linked government bonds. The fixed volume for repo swaps is being raised to SEK 2 billion per government security and primary dealer.
During the autumn, the Debt Office has received several suggestions and points of view for larger changes of the repo commitment. At present, the premium is the same regardless of the level of demand for repos. It would be possible to make the premium depend on the repo volume demanded, for example premiums with two or more steps. Another suggestion is to have the same premium for repos in nominal and inflation-linked government bonds. It would also be possible to use repo swaps as a main alternative in our commitment rather than repos.
Demand for repos with us has decreased and stabilised at manageable levels. Major changes are therefore not required for this reason. None the less there is reason to review the policy for our commitment, although more far reaching changes require a dialogue with the market on more comprehensive and major issues. To enable a dialogue of this kind to take place at the same time as the market has access to the same information, we will circulate documentation at the beginning of next year for continued discussion. The objective reasons which emerge from this dialogue will then determine whether further changes will be made.
Further information can be obtained from:
Anna Sjulander, Funding Manager, telephone +46 8 613 47 07
Thomas Olofsson, Head of Funding, telephone +46 8 613 47 82