Sweden's Debt Office halts t-bill trading

The Swedish National Debt Office (Riksgälden) announced on Thursday it was putting a temporary hold on its market commitment in treasury bills.

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The Debt Office explained the move by saying it was planning to hold talks with primary dealers due to “uncertainty in the market”.

The agency’s market commitment in treasury bonds remains the same.

“This decision is analogous to a stop in trading on a stock exchange. We simply need more information about what’s happening in the market before we can honour our market leading repurchase agreements,” said the Debt Office’s Thomas Olofsson to the TT news agency.

“What’s been put on hold now for a few hours is the support we give to the market by lending out treasury bills. The lending we do is only overnight to the banks when they have a shortage of bills and it works as a support for the market.”

The stoppage in treasury bill trading means that one of the banks’ short-term financing options has disappeared in the middle of a growing financial crisis.

Part of the reason is the spike in demand for treasury bonds, which are seen as a safe investment during rocky periods in the financial markets.

“Demand is too large. It’s a panic and everyone wants to get in on the only safe thing they see on the market,” said an analyst who wished to remain anonymous to TT.

According to George Ulvelius, head of investments with the Legal, Financial and Administrative Services Agency (Kammarkollegiet), the situation in the market for treasury bills is the result of pressure from large banks rather than a blow to their financing sources.

“The banks decided this morning in unison to take away the ‘right side’ of their entries. They’ve stopped selling treasury bills. It’s not possible to buy bills from the banks any longer,” he said.

Ulvelius has never seen a similar move during his 24 years in the market.

“The banks probably want to send a message to [the Riksbank at] Brunkebergstorg so they see how serious it is and that the Riksbank supplies them with liquidity or lowers interest rates,” he said.

“I think the Riksbank will do something in the next few days since the market is so sluggish.”