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BONDS

Swedes’ borrowing increases at record pace

Swedish households increased their loans from banks and housing credit institutions by 53 billion kronor ($7.72 billion) in the third quarter, the highest increase ever recorded for July to September, Statistics Sweden (SCB) reported on Monday in its latest savings barometer.

Published: 15 November 2010 12:36 CET

During this time, interest rates rose, with Sweden’s central bank, the Riksbank, increasing the repo rate by 0.25 percentage points twice to 0.75 percent. However, the hikes did not deter Swedes from borrowing.

“One reason why loans continued to increase could be that there were strong incentives to buy a home before the household loan ceiling went into effect on October 1st,” the agency said in a statement.

At the end of the quarter, the total volume of loans handed out by banks and housing credit institutions amounted to 2.37 trillion kronor.

At the same time, households continued to sell shares and equity funds in the third quarter even as the Stockholm Stock Exchange netted a 10 percent gain during the period.

A total of 4 billion kronor in shares and 3 billion kronor in equity funds were sold during the quarter, compared with 7 billion kronor of shares and 4 billion kronor of equity funds in the second quarter.

Despite the share sales, households increased their assets in shares by 49 billion kronor and equity funds by 12 billion kronor as a result of the growth in the stock market.

The stock market growth resulted in an increase of total household share wealth to 579 billion kronor at the end of the quarter, the highest value since the fourth quarter of 2007.

However, the levels are still far below the peak experienced In second quarter of 2007, when share wealth amounted to nearly 700 billion kronor.

In addition to equity funds, net purchases in other funds, including mixed funds and funds-in-funds, amounted to slightly over 20 billion kronor in the last six months, of which 2 billion kronor were purchased in the third quarter.

However, following sharp demand during the financial crisis, interest for bond and money market funds has weakened recently.

Bond and money market funds now consist of less than five percent of total fund assets, with households making net sales of bond and money market funds of less than 500 million kronor in the third quarter.

Separately, household financial savings, or transactions in financial assets minus liabilities, amounted to a 15 billion kronor shortfall in the third quarter, the lowest financial savings figure since the fourth quarter of 2006.

The low financial savings in the quarter resulted largely from a combination of households selling shares, equity funds and bonds and at the same time, increasing their loans during the quarter.

However, the net wealth of households, or financial assets minus liabilities, amounted to 3.26 trillion kronor, an increase of 158 billion kronor compared with the previous quarter.

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CLIMATE

Swedish central bank sells bonds ‘for climate reasons’

Sweden's Riksbank has sold government bonds issued by Canadian and Australian states "for climate reasons", in one of the first cases of a central bank joining the global divestment movement.

Published: 15 November 2019 13:09 CET
Swedish central bank sells bonds 'for climate reasons'
The Bulga Coal complex in New South Wales, Australia. Photo: Glencore
Deputy Governor Martin Flodén revealed on Wednesday that the bank had in April divested itself of bonds issued by the Canadian province of Alberta, and more recently sold bonds issued by the Australian states of Queensland and Western Australia. 
 
“We will not invest in assets issued by issuers with a large climate footprint,” he explained in a speech at Örebro University on Wednesday.  “Australia and Canada are countries that are not known for good climate work. Greenhouse gas emissions per capita are among the highest in the world.” 
 
Flodén said the move followed a decision last year by the bank's executive board to take sustainability into account when making investment decisions. 
 
“We can contribute to the climate work to some extent by giving consideration to sustainability aspects when investing in the foreign exchange reserves,” Flodén said. “We are now doing this by rejecting issuers who have a large climate footprint.” 
 
Alberta's tar sands are some of the most polluting hydrocarbons in the world, while Queensland and Western Australia host some of the world's biggest coal mines. 
 
In a statement emailed to reporters, Christine Myatt, spokeswoman for Alberta Premier Jason Kenney, insisted that Alberta had the “highest environmental standards in the world”.  
 
“If the Swedish central bank is really concerned with making a difference on climate change they need to be investing more in ethical producers such as Alberta which have shown dramatic gains in reducing emissions,” she said. 
 
The City of Örebro was the first Swedish city to commit to pull its funds out of fossil fuels, following the example of cities like San Francisco, Seattle and the Dutch town of Boxte.

 
In his speech, Flodén said he had doubts about taking a more active approach to sustainability, and investing foreign exchange reserves directly “in particularly climate-friendly assets, such as green bonds.” 
 
Sweden's reserves, he explained, are currently invested solely in government bonds, something the bank was reluctant to change.  
 
“This is partly to hold down financial risks, and partly because monetary policy, apart from determining the general interest-rate level, should disturb pricing on the financial markets as little as possible.” 
 
This means that central banks can only have a limited role in pushing the world towards a greener economy, he said. 
 
“This is entirely natural,” he said. “The important decisions on how climate change should be counteracted in Sweden are political and should be taken by the government and the parliament.”
 
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