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Document Type

Case Study

Case Series

Market Support Programs

JEL Codes

G01, G28

Abstract

In the spring of 2020, corporate revenues in Sweden felt the direct effects of the coronavirus pandemic and the resulting public health measures. With future cash flows in question, many investors sold corporate debt for safe assets. Sweden's corporate bond market-particularly vulnerable to stress due to its heterogeneity, fragmentation, and lack of transparency-saw diminished liquidity. On March 19, 2020, the Sveriges Riksbank (Riksbank) announced it would purchase commercial paper and corporate bonds as part of a much larger bond-buying scheme, announced three days earlier, that included Swedish government, municipal, and covered bonds. It authorized the program under Chapter 6, Article 5 of the Sveriges Riksbank Act. Commercial paper purchases began soon after this announcement, but corporate bond purchases did not commence until September 2020. Although corporate credit conditions had improved by then, the Riksbank sought to establish a presence on the corporate bond market so it could scale purchases if needed. In June 2020, the Riksbank said it would limit its purchases to a nominal SEK 10 billion (about USD 1.2 billion), but it later raised the limit to SEK 13 billion. The program purchased kronor-issued, investment-grade bonds on the secondary market with maturities of less than five years. Later that year, the Riksbank announced purchases would be further limited to issuers complying with certain carbon emissions standards. Purchases peaked at SEK 445 million the week of February 15, 2021. After an extension to its original expiration date of June 30, 2021, the program formally expired on December 31, 2021. In November 2021, the Riksbank announced it would replace maturing bonds in order to maintain its net holdings, a practice it would review each quarter.

Date Revised

2022-07-15

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