The Swedish National Debt Office will further increase exposure in foreign currency with the aim of reducing the costs of central government debt.
The Government has, after a proposal by the Debt Office, decided to increase the mandate for strategic krona positions by SEK 35 billion. This means that the position for a stronger krona against the euro is increased from the SEK 15 billion that we have already assembled to SEK 50 billion in total. This position will be built up gradually until 1 November 2009.
Even if the krona has strengthened since its low in early March, it still appears to be greatly undervalued. We consider that the krona value is far from the levels that can be justified by more fundamental conditions. It should therefore be possible for the krona to strengthen considerably in time. We can reduce the cost of central government debt by increasing foreign currency exposure when the krona is weak and decreasing it again when the krona is strong.
The decision does not affect the volume of the foreign currency borrowing. The position can be built up with currency forward contracts or by loans already taken in foreign currencies being changed to kronor. The estimation that we will borrow a total of SEK 180 billion in foreign currency this year, which we presented yesterday, is thus unaffected.
The Government's press release can be found on www.regeringen.se
For further information, please contact:
Bo Lundgren, Director General, +46 8 613 46 51
Thomas Olofsson, Head of Debt Management, +46 8 613 47 82
Thomas Olofsson, Head of Debt Management, +46 8 613 47 82