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Nordic Fixed Income

Fixed Income Products - Sweden

Treasury Bonds

Issuer: The Swedish State through the Swedish National Debt Office. Type of debt instrument: Running promissory note. A fixed interest bond with annual payment of interest. 

Maturity: Over two years from issue date. Maturities of up to 16 years have been issued. Denomination: Lowest denomination is SEK 100 000. 

Issuance: Issued through the Swedish National Debt Office issue framework via tender offers. Bids are submitted to dealers authorized by the Swedish National Debt Office, i.e. banks and securities institutions. Tenders at the highest price are accepted first and then in descending order until the issue amount is filled. 

The secondary market: The liquidity of the Swedish treasury bond market is considered to be healthy. The secondary market also includes a market where trading is conducted by telephone. The participants involved in this market - banks and securities institutions - are market-makers. Since May 2001, Interbank trades, i.e. trades between two market-makers, in 2-, 5-, or 10-year government bonds are carried out in an electronic marketplace supplied by Nasdaq Stockholm. Swedish treasury bonds can also be traded on Retail Bonds list, an electronic exchange within Nasdaq Stockholm. 

Valuations: The pricing of the instruments is stated as a real annual interest rate. The buyer does not pay the nominal amount, but pays the market price (clean price) plus any accrued interest since the last interest payment date. To calculate the dirty price (P) i.e. the price plus accrued interest, use the following equation:


Mortgage Bond equation

P= settlement amount / dirty price (per 100 SEK nominally)
Y=yield to maturity (%)
k= number of remaining coupons
C= coupon (%)
N= nominal amount (100 SEK)
n= term to maturity (day count basis: 30E/360) 


Delivery and settlement: The delivery and settlement date for treasury bonds is three banking days following the transaction date. The interest payment is received on the interest payment date into the EuroClear Sweden account in which the bonds have been registered. 

Link to Swedish National Debt Office:www.riksgalden.se
(Please refer to Instruments/Treasury bonds under the heading "Funding")

Treasury Bills

Issuer: The Swedish state through the Swedish National Debt Office. 

Type of debt instrument: Running promissory note. 

Maturity: Up to one year. Maturities of 720 days have been issued. 

Denominations: 1, 5, 10, 20, 50, and 100 MSEK. 

Issuance: Issued through the Swedish National Debt Office issue framework via tender offers. Bids are submitted to dealers authorized by the Swedish National Debt Office, i.e. banks and securities institutions. Bids at the lowest rate of interest are accepted first and thereafter in order of increase until the stated volume of the issue has been filled. 

Secondary market: The liquidity of the Swedish treasury bill market is considered to be healthy. The secondary market also includes a market where trading is conducted by telephone. The participants involved in this market - banks and securities institutions - are market-makers. Swedish treasury bills can also be traded on Retail Bonds list, an electronic exchange within Nasdaq Stockholm. 

Valuations: The pricing of the instruments is stated as a simple annual interest rate. Because these are discount instruments, the buyer does not pay a nominal amount, but pays the nominal amount (future value N) less the simple year's interest – a discounted amount. To calculate the discounted amount (present value P) uses the following equation: 

Treasury Bills equation

P = settlement amount
N = nominal amount
R = simple annual interest rate
D = remaining maturity in days (day count basis: Act/360) 

Delivery and settlement: The delivery and settlement date for treasury bills is two banking days following the transaction date.
Link to the Swedish National Debt Office: www.riksgalden.se (Please refer to Instruments/Treasury bills under the heading "Funding")

CPI Linked Bonds

Issuer: The Swedish State through the Swedish National Debt Office. 

Type of debt instrument: Running promissory notes. Interest bearing bonds with annual payment of interest of the nominal amount. The holder also receives an amount over and above this payment which is related to the fluctuations in the consumer price index over the maturity of bond. Real yield zero coupon bonds are also issued. 

Maturity: Five to 13 years from issue date. 

Denomination: Lowest denomination is SEK 5 000. Issuance: Issued quarterly by the Swedish National Debt Office's authorized dealers, i.e. banks and securities institutions. 

Secondary market: The liquidity of the Swedish index-linked bond market is considered to be high. The instruments are traded both OTC and electronically in Nasdaq's retail segment. Valuation: The pricing of the instruments is stated as a real annual interest rate. The buyer does not pay a nominal amount, but pays the market price plus any accrued interest since the last interest payment date. Each year a nominal interest rate is fixed, plus an index-linked rate calculated on the fluctuation in the CPI rate on the interest payment date. 

Delivery and settlement: The delivery and settlement date for index-linked bonds is three days following the transaction date. The fixed interest payment, plus the change in the consumer price, is paid annually on 1st of December. 

Link to Swedish National Debt Office:www.riksgalden.se (Please refer to Instruments/Index-linked bonds under the heading "Funding")

Certificates

Issuer: Banks, companies, mortgage institutions, municipalities, county council as well as the Swedish Central Bank in the event of money market interventions in the banking system.

Type of debt instrument: Current bearer instrument. 

Lifetime: Up to one year. Lifetimes of more than one year are offered in exceptional cases. 

Issues: Issues are normally carried out on request through a bank or brokerage firm and as part of a certificate program. Nasdaq Stockholm lists the certificate program and not the individual certificates. The reporting is done on an aggregated level for all certificates that mature in a certain month. 

Secondary market: Liquidity in certificates is generally somewhat weak, although it is good for mortgage certificates. The secondary market is made up of a telephone-based market where some banks and securities firms act as market makers, or market guarantors. 

Valuation: The setting of prices for instruments is carried out as with simple annual interest. Since certificates are discount instruments, the buyer of a certificate does not pay the nominal value of the certificate, but instead pays the nominal value discounted with the market rate (simple annual interest). The calculation of the discounted amount, the cash amount, is the same as for Treasury bills. Please refer to the following formula: 

Treasury Bills equation

P = present value
N = nominal value
r = market rate (simple annual interest)
d = remaining time-to-maturity in actual days (day-count base: actual/360). 

The day-count base 30/360 may be applied for certificates issues prior to 1 April 2001. 

Delivery: The settlement day and delivery for certificates is two banking days after the transaction day.

Debenture Loans

Issuers: Debenture loans are issued by banks, credit companies and other borrowers. 

Type of debt instrument: Promissory note payable to a specified person. Normally a fixed interest instrument with annual interest payment, but zero coupon issues have also been made. 

Maturity: Over two years from issue date. 

Denomination: Varies. 

Issuers: Issues are made when the borrower has a financing need and these can be considered an alternative to issuing bonds. These bonds are normally taken up by larger investors, for example, insurance companies. 

Secondary market: The liquidity of debenture loans in Sweden cannot be considered as being high. The liquidity in zero coupon debentures is slightly better. These bonds can be traded on electronically in Nasdaq Stockholm's retail segment. 

Valuation: The pricing of a debenture bond is stated as a real annual interest rate. The buyer does not pay a nominal amount, but pays the market price of the loan plus any accrued interest since the last interest payment date. For ex-coupon debenture loans there is no accrued interest on transfer. 

Delivery and settlement: Delivery and settlement of debenture loans takes place three days following the transaction date. The interest payment is received on the same day as the interest payment into the account which has been given by the holder when registering the acquired debenture certificates with the issuer. Alternatively the debenture certificates may be issue by EuroClear Sweden.

Mortgage Bonds

Issuers: The Swedish mortgage lending institutions – some of them are Stadshypotek AB, Swedbank Hypotek AB, SBAB, Länsförsäkringar and SEB AB - issue bonds on an ongoing basis to finance their lending operations. 

Companies and local authority-financed intermediaries finance their own lending operations in the same way as the mortgage lending institutions. Examples of the larger ones are Svensk Exportkredit (SEK), Industrikredit AB and Kommuninvest I Sverige AB. 

Type of debt instrument: Promissory note. Fixed interest rate bonds with half-yearly or annual interest payments. 

Maturity: As a rule, over two years from issue date. 

Denomination: Varies. Issuance: The intermediary institutions sell their bonds through a fixed issue syndicate consisting of Swedish banks and securities institutions and, in some cases, through overseas banks. The issues are carried out on a continual basis when the mortgage lending institutions require funds to finance their lending operations. These are secured by first mortgage loans on properties owned by borrowers. 

Secondary market: The liquidity of the mortgage bond market in Sweden is considered to be fairly high in the larger mortgage lending institutions' issues. The secondary market trading is mostly conducted by telephone. The participants involved in this market - banks and securities institutions - are market-makers. Mortgage bonds can also be traded electronically on the market STO Retail Bonds. 

Valuation: The pricing of the instruments is stated as a real annual interest rate. The buyer does not pay a nominal amount, but pays the market price plus any accrued interest since the last interest payment date. To calculate the price (P) of a mortgage bond with an annual interest payment, use the following equation: 

Mortgage Bond equation

P= settlement amount / dirty price (per 100 SEK nominally)
Y= yield to maturity (%)
k= number of remaining coupons
C= coupon (%)
N= nominal amount (100 SEK)
n= term to maturity in years (day count basis: 30E/360) 

Delivery and settlement: The delivery and settlement date for mortgage bonds is three banking days following the transaction date. The interest payment is received on the interest payment date into the EuroClear Sweden account in which the bonds have been registered, or alternatively by presenting the coupons attached to the bond against payment at a bank. 

Links to the Swedish mortgage lending institutions: 

Fixed Income Index

OMRX

OMRX is a family of fixed income indexes which share the common purpose of illustrating the changes in value for a particular type of passively managed portfolio of liquid Swedish interest-bearing securities. The index family is calculated continuously during every Swedish banking day and is updated in real-time. Historical data on some of the OMRX family of indexes has been stored since 2 January 1990. 

Rules for the Construction and Maintenance of the OMRX Indexes

NASDAQ Credit SEK

The Nasdaq Credit SEK Index series are designed to provide exposure to a portfolio of liquid corporate- and municipality investment grade bonds denominated in Swedish Krona (SEK). The indexes are structured to provide investors with accurate benchmarks for the Swedish corporate– and municipality bond market, essential for asset allocation and performance evaluation. To ensure objectivity and reliability, Nasdaq Credit SEK Indexes are strictly rule based. Only unsecured nominal fixed rate bonds issued in SEK are eligible. Bonds need to be rated investment grade by at least one of the following agencies S&P, Moody’s or Fitch. Total nominal outstanding amount for the issuer must exceed SEK 500M, each bond must have a nominal amount of at least SEK 50M. Maximum total weight for all bonds by any single issuer is set to 5% and each bond is proportionally adjusted according to its initial weight. 

Price quotes used in index calculation are daily end-of-day Mid-valuations provided by SEB. 

Premium Bonds

Issuer: The Swedish State through the Swedish National Debt Office. 

Type of debt instrument: Running promissory note. A fixed interest bond with an annual interest payment in the form of a draw at a time in accordance with a schedule which is decided by the Swedish National Debt Office. Some premium bond issues are issued according to a fluctuating dividend/profit plan where the return/yield is fixed and based on the interest rate on a 180 day Swedish treasury bill. Other premium bond issues are issued at a fixed rate until maturity. 

Maturity: Normally five to 10 years from the issue date. Denomination: varies from year to year from a nominal SEK 1 to SEK 10. 

Issuance: Issues are carried out following a decision by the Swedish National Debt Office. They also fix the issue price and the price plan for issues etc. Premium bond issues have been sold through banks and securities institutions. 

Secondary market: The liquidity of the premium bond market is considered to be good, even though they are issued in nominal denominations. Around the time of the drawing of premium bonds there is no trading in the premium bond loans upon which a price is going to be allotted. Premium bonds are mainly traded electronically. 

Valuation: The price of a premium bond is stated in Swedish krona per premium bond. The price includes the accrued interest/return up to and including the settlement date. There may be substantial differences in the price of individual premium bonds and series of numbers. These differences are due to the guaranteed return on some of the series of numbers. The drawing of prices on premium bonds is conducted by a set series and numbering order and drawn by the Swedish National Debt Office. A certain amount of small prices are drawn on the number of orders only. This means that an investor who has purchased an entire series of premium bond numbers will receive a guaranteed return - between 1.5% and 4.5% of the nominal value of the premium bond. 

Delivery and settlement: The delivery and settlement of premium bonds is three banking days following the transaction date. 

Link to the Swedish National Debt Office:www.riksgalden.se
(Please refer to Retail borrowing under the heading "Funding")

All information provided on this page shall be deemed to be general information regarding the instruments that can be traded at the exchange. For accurate rules for trade with the instruments we refer to the rules and regulations. Information on this page shall under no circumstances constitute any recommendation regarding investment decisions. The visitor shall be personally liable for the risks associated with any investment decision based on information provided on this page. Notwithstanding that the accuracy of the information provided herein has been verified, Nasdaq Stockholm assumes no liability with respect to the accuracy or use of such information.
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