Lower Required Capital Injection, But Issuance Implications Remain

The Riksbank now estimate that it will required a SEK40bln capital injection to restore its equity to the basic level in the Riksbank Act. This is down from SEK80bln estimated in October.

• SEB had expected the revised injection to be between to SEK50-60bln, and believe "this is likely to be financed initially by short-term liquidity instruments but eventually rolled into bonds".
• Conditional on their initial forecast above, and alongside expectations for weaker government finances, SEB see "scope for a significant upward revision to bond issuance", projecting SGB bond auction amounts to increase by "by 50% to SEK 4.5bn/auction during 2024 (= 90 bn annual rate)".
• "Combined with QT, SGB net supply is expected to accelerate significantly in the coming years", according to SEB.
• Governor Thedéen noted that the difference in figures "is mainly due to the fall in interest rates, but also to the gains resulting from the currency hedges the Riksbank implemented during the autumn" and "the capital injection we finally arrive at will be shown in the petition submitted to the Riksdag in March".