Riksbank Says Considering Establishing Krona Bond Portfolio

By Jonas Bergman

April 27 (Bloomberg) — Sweden’s Riksbank is considering building a portfolio of krona bonds that would help it enact crisis measures faster, officials at the bank’s monetary and financial stability departments said in a commentary.

While the bank’s systems have worked well both in normal times and during the financial crisis, that doesn’t guarantee future success, Heidi Elmer, Peter Sellin and Per Aasberg Sommar said in a commentary on the bank’s website today.

“The Riksbank is therefore now reviewing how to further improve preparedness in the framework in order to be able to deal with future crises that may require different measures,” they wrote. “Acquiring a bond portfolio in Swedish kronor once again could ensure that the Riksbank has the systems, routines and knowledge needed to be able to take extraordinary measures at short notice in the future.”

The Swedish central bank has cut interest rates twice since December to prevent the largest Nordic economy from falling into a recession after output shrank at the end of 2011. The bank left the benchmark repo rate at 1.5 percent at this month’s meeting.

Riksbank crisis measures during the financial turmoil that started in 2007 helped the country achieve the biggest economic rebound in the European Union in 2010.

7 Responses

  1. Can’t fathom what this has to do with policy agility. At best, it’s a complicating constraint on policy options. Will they be called Luddite Bonds?

    Maybe they’re presuming default rule by the banking class – which could happen, if absolutely nothing ever changes.

    “One bond to fool them all,
    one bond as reference.
    One bond to link them all & in the confusion bond them. 🙂
    In the land or Order, where the constraints lie.”

    Does the Riksbank have a tower where it’s dark half the year?

    What happens if evolving populations with constantly emerging options simply decide to institute some loose change? 🙂

  2. ” the systems, routines and knowledge needed to be able to take extraordinary measures”

    Pressing the ‘buy’ button? Bidding in an auction? Mark up columns in a spread sheet? Draft press releases to explain it all to a dubious public?

    The complicated life of a central banker.

  3. “Huh”, indeed.

    “Acquiring a bond portfolio in Swedish kronor ONCE AGAIN”

    They used to have one before, and sold them all?

    “The bank left the benchmark repo rate at 1.5 percent”

    Repo of what? Greek bonds?

    Very mystifying, for this non-banker.

Leave a Reply

Your email address will not be published. Required fields are marked *