The Sweden National Debt Office (Riksgälden) is to introduce a 50-year government bond in the middle of June, provided market conditions are suitable.
It will be the longest bond the Swedish government has ever issued, surpassing the 30-year bond offered to market in 2009.
It hopes to raise SEK10bn (€990m) from its latest endeavour.
No details have yet been provided about the expected rate of return.
Half a lifetime
The Debt Office said its “overall assessment is that the long bond can reduce the risk on the central government debt, at a low cost from a historical perspective”.
But while it makes sense from a Swedish perspective, is tying up money for 50 years an appealing prospect for investors?
Speaking to Bloomberg, the Debt Office’s head of debt management, Anna Sjulander, said a survey had been commissioned at the end of 2020 that found longer-dated bonds tend to draw mostly foreign investors.
But the landscape has changed since then and there has been a spate of long-dated issuances coming to market over the past few months – meaning that demand could be on the wane.
And if foreign investors fail to queue up, domestic investors may be reluctant to pick up the slack.
Alexander Onica, an asset manager at Skandia Investment Management told Bloomberg that he thinks domestic investors will have little interest in “locking up money for half a century”, at a rate of around 1.5%.
Overly ambitious?
With full details yet to emerge, the terms of the bond could sweeten its appeal.
Also, Sweden’s reputation for having “very high quality” debt and scoring “very high” on ESG metrics could attract investors, Ella Hoxha, a senior investment manager at Pictet AM, told Bloomberg.
Ultimately, the proof will be in the pudding, as they say.
With the industry standard caveat of “providing market conditions are suitable”, the coming weeks will tell whether the 50-year bond will even come to market and how popular it will be with investors.
