SWEDEN: Budget Deficit Tracks Below NDO F'cast, Unlikely To Change Issuance Plan

After incorporating July’s budget balance data, the Swedish budget deficit tracks SEK10.8bln outside the National Debt Office’s (NDO) May forecasts. However, this does not yet suggest a need to increase existing borrowing plans, as the current forecasts do not incorporate the smaller-than-expected 2024 Riksbank capital injection announced in June (of SEK25bln vs an initial estimate of over SEK40bln).

• The budget balance moved back into surplus in July, at SEK6.4bln. This was broadly in line with the National Debt Office’s forecast of SEK6.1bln. 
• The primary balance saw a surplus of SEK1.1bln (vs a forecasted deficit of 2.1bln), with tax revenues SEK1bln higher than expected, and spending lower than expected from a number of Government agencies.
• Swedish issuance has been on a summer break since June 19, but nominal SGB auctions will resume next Thursday (Aug 14), with details to be announced today. 
• The size of upcoming nominal bond auctions will now be SEK4bln (vs SEK3.5bln prior), in line with Debt Office guidance. 
• There may be increased focus on demand metrics at next week’s auction, after the June 19 10-year SGB re-open saw a bid-to-offer ratio of just 0.86x (details here: https://marketnews.com/extremely-weak-10-year-auction-this-morning).
• When asked by the MNI Policy Team on the implications of this weak auction for overall issuance, the NDO responded that they “will not compensate the volume not being issued by increasing volume in future auctions".