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Nordic Update

Market rates climb on Riksbank decision

Publicerad: 11 januari 2019, 15:49

Stefan Ingves Bild: Riksbanken

As the result of the Riksbank’s decision to raise the repo rate, Swedish market rates have started to climb. The Stibor 3-month rate is now at its highest level for almost four years.

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Just before Christmas, Riksbanken announced the decision to raise the repo rate by 25 bps to -0.25 per cent. A long anticipated decision although uncertainty about it remained big to the end. Following the decision, housing lenders have taken the opportunity to raise mortgage rates and it has affected the credit market as well.

By then, the market has cautiously started to price in the repo rate hike, but it wasn´t until Stefan Ingves and his merry men in the Riksbank board of governors announced the first hike in years that the market dared to take the full step.

Whether or not there will be more to come remains highly uncertain and the question is whether Stibor 3M will keep rising or if it will reach a new equilibrium at the current levels. For the Swedish property industry, it is a very important parameter as Stibor 3M is the main benchmark for pricing the vast majority of the industry’s floating rate funding. With Stibor 3M on the rise, so should the industry’s cost of capital rise.

However, the movement is still moderate and for many companies it is a positive development as the mix of interest rate swaps might just cause cost of capital to fall, while the interest rates are approaching zero per cent.

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