Transcript: Interview with Swedish DMO Head of Funding Johan Bergström

3 June 2025

By Marta Vilar – MADRID (Econostream) – Following is the full transcript of the interview conducted by Econostream on 26 May 2025 with Johan Bergström, Head of Funding of the Riksgälden.

Q: Given the expected deficits for the years ahead, the Riksgälden is now going to increase the nominal government bond issuance. In fact, in your latest update of your funding strategy you say you will increase the supply of government bonds from SEK5 billion to SEK6 billion. Do you have any targeted amount in mind for the entire fiscal year?

A: For this year in the previous plan we had planned for 20 auctions with SEK5 billion each. But now from June we will increase that to SEK6 billion per auction and we have also added one extra auction. Therefore, we'll end up with a nominal issuance of SEK118 billion this year. Next year, we will issue SEK6 billion per auction, and we will do 21 auctions, and we will also do one syndication for SEK20 billion. So, in 2026 our issuance will be SEK146 billion.

Q: Your expected gross borrowing will surpass SEK500 billion in 2026, that’s significantly higher than the figures for these past years. How will you make sure this is sustainable and there are no risks?

A: So far we have seen that our bid-to-covers in our bond auctions and for the T-bills as well are at reassuring levels. The nominal bonds are around three times oversubscribed each time. In 2024 and 2025, the central bank has been selling part of their QE portfolio. So, the amount coming to the market in 2026 due to this selling is higher than what we are issuing despite the increase. So, the free float will not increase next year anymore than it is already increasing this year.

Q: And how will you distribute your expected issuance throughout the year?

A: In our latest forecast we said that the main part of our bond issuances is coming in the 10-year sector. Then in the 5-year and some in the 2-year sectors, and then we have a certain amount that we can choose of the old on-the-run bonds. For the remaining part of the year, the issuances will be concentrated in the 10-year sector.

Q: Do you already have any plans with regards to the timing of such issuances?

A: We are very open with our communication. We have said that almost every second Wednesday we will sell or tap our government bonds. So it's very clear when exactly bonds are coming. We try to make all investors and our primary dealers as confident as possible as to what to expect from us regarding our issuances.

Q: So, should we expect any new bonds from you anytime soon?

A: There's a new bond coming on June 4, a new 2036 bond. Towards the later part of the year that will become the 10-year benchmark. So, a lot of issuance will be done in the new tenor as well as the current tenor benchmark.

Q: So, no other new bonds apart from this and the foreign currency bond we will talk about in detail in a moment.

A: No, no more new bonds for this year. Next year we will introduce one 10-year bond via syndication during the first quarter and another one after the summer, which will be a 10- or 11-year bond.

Q: Before you said that you currently focus on bonds on the 10-, 5- and 2-year tenor. Which are the most likely for you to reopen sooner?

A: We have also indicated that we will tap one of the two longer bonds in the coming months or after the summer. Last week we tapped the 2071 bond and later this year we will tap the 2045 bond, but the size of it will be smaller. So, the bulk of the volume will come in the 5-year and 10-year sector.

Q: I understand your strategy is mostly predetermined rather than opportunistic. Are there any parts of your strategy in which you are much more opportunistic?

A: We are much more opportunistic in the liquidity management and commercial papers in foreign currency.

Q: In your updated strategy you say you will increase your short-term instrument issuance. Which part of the curve is now attracting more demand from investors?

A: Regarding the issuance of short-term instruments in SEK I would say we have seen better demand mainly in the 3-month sector. We are issuing 9- and 6-months, 9- and 12-months as well, but the bulk of the demand seems to be in the 3-month bucket from the auctions. Regarding commercial paper, we issue mainly in USD and euro. The highest demand there is in the 2-weeks and 3-months. But there we try to be more clinical in choosing the exact maturity date that suits our projected cash flows.

Q: You say you mainly use syndication for foreign issuance bonds, but do not rule out doing so with SEK bonds. Will you do it in 2025?

A: Not in 2025, but during the first quarter of 2026.

Q: The Swedish National Debt Office continues to issue inflation-linked bonds. Why is this still attractive for you, given that some other European sovereign debt issuers have completely abandoned these?

A: Last year we published a report where we said we would decrease the outstanding stock in the future and that in 2029 we would have an outstanding nominal stock of SEK80 billion. We have been issuing inflation linkers for a very long time and it's important that we have a good investor base, both domestic and non-domestic. We don’t see the need for quickly closing it down, but of course we have come to the conclusion that the level of linkers we had did not decrease the cost or the risk involved. Therefore, we decided we will reduce it and once we get to the forecasted level of SEK80 billion outstanding, we’ll do another analysis and see if it’s worth it or not. But at this stage we are working towards the SEK80 billion nominal target.

Q: In your updated strategy, you say you will issue an additional foreign currency bond this year. Could you give us any details about it?

A: Normally, we have issued these bonds somewhere between the 2- and the 5-year sector, and I would say it’s likely that we will stay in that tenor. Increased funding needs could suggest that we need to go ahead with a slightly longer tenor, which for us would be the 5-year, but we’ll see when it is time. Funding in foreign currency via syndication gives us very good flexibility in choosing timing and redemption. So, we will see when it's time.

Q: Which foreign currency do you expect to issue in this transaction?

A: We are mainly considering euros or dollars. We issue these bonds as a precautionary measure, so I guess we will go for the major currencies for the sake of continuity, because we have the broader investor base if we need to increase our funding quickly.

Q: Is there any possibility that you will go for minor currencies in the future?

A: That would of course depend on the reception of the bonds. If that were a much better cost-efficient way of funding, then yes. But as things stand now and given our investor base in those two countries, I think that's enough for us.

Q: You also said that your foreign currency exposure was to be gradually phased out and attain the target value of zero as of 2027. Does this change now given your recent announcement about the new foreign currency bond?

A: No, that's still the plan. All bonds in foreign currency are fully hedged, so there's no FX exposure related to them.

Q: What about green bond issuance? Should we expect you to reopen or issue a new green bond in 2025? Where do your plans stand in this regard?

A: We do not have any clear plans to issue green bonds. We don't have the green expenditure dedicated for any further issuance. We will focus on maintaining liquidity and making sure that the market is functioning properly. For the moment it wouldn’t be more cost-efficient to issue green bonds than nominal bonds, so we will stick to the latter.

B: So, what should change for you to change your mind in this regard?

A: First of all, we need to have green expenditures in the budget. That's the main step. Then we would need to update the green framework. So, it would take time.

Q: Given that you expect to increase your nominal issuance, would that result in a higher debt-to-GDP ratio?

A: With the current GDP forecast, we are increasing debt slightly faster than the rate at which GDP is growing. We are going from 18% to 20% towards the end of the forecast, by end of 2026. So, in that sense we feel very comfortable with these levels.

Q: The Swedish Prime Minister said that Sweden provisionally aims to raise defence spending to 3.5% of GDP by 2030. In your updated strategy, you also say that the largest part of the defence funding will occur via borrowing. So, what impact do you expect it to have on your issuance?

A: Once all the details regarding defence spending are passed in the budget, we will get the final number about how to adjust the funding plan going forward.

Q: So you don't know yet which instruments you will use to fund defence expenditures.

A: As we take all government expenditures, we use our funding strategy. Regardless, we don't pinpoint any funding to a certain expenditure or a certain need. So, once we get the budget deficit and we take into account our outstanding debt and its maturity, we create a funding plan according to our strategy. For us, nominal bonds are the most important funding source.

Q: Some of your peers are using retail bonds to fund defence expenditures. Would you rule this out?

A: I wouldn’t rule it out but we closed the retail funding programme in 2020 because then rates were negative, and it was very hard to justify retail funding. In the future, it now seems unlikely that we will turn to retail.