On the development of SWESTR in May 2024

We analyse the development of the Swedish krona Short-Term Rate (SWESTR) in May 2024. The SWESTR is a reference rate that can be used for setting rates between banks, and it is based on transactions happening in the financial market. We do the analysis with support from a Power BI report, which we have developed and which is available in our Portfolio. For more information on the SWESTR, please see our previous blog post or the Swedish central bank’s website.

Overview of SWESTR in May 2024

We filter the Power BI report to only show data before the 1st of June 2024. We then see in the picture below an overview of the SWESTR development. As an example, we see that May 2024 ended with the SWESTR at 3.644%. From our blog post on the March development, we notice that this is 25 bps lower than March, which ended at 3.895%. The SWESTR has increased also by 25 bps compared to one year ago.

The chart in the upper-left corner presents averages calculated over 1 to 6 months. We see that all averages are slightly below 4%, just like we concluded in the March blog post. At 15th of May, the policy rate was cut by 25 bps to 3.75% by the Riksbank. This will likely be reflected in coming months in the 1 – 6 months averages presented above. It is already seen in the 25 bps decrease of the SWESTR to 3.644%.

SWESTR trend

In the bottom left chart, in the picture above, we see that the rate with which the SWESTR increases, has slowed down. At the end of March 2024, the SWESTR was at 3.9%, and it was unchanged compared to the end of Q4 2023.

To further review the trend over time, we zoom in on the development per month, and we remove a filter so that we can see the current average despite Q2 2024 not being concluded. We then see that 7 months in a row ended at 3.9%. The policy rate was increased from 3.75% to 4.00% from the 27th of September 2023. Then it was decreased in May 2024, and consequently the SWESTR decreased as well. The policy rate is at 3.75% and SWESTR ended May approximately 11 bps lower at 3.644%.

Number of transactions and SWESTR volume

We also review the number of transactions and the SWESTR volume in monetary terms. First, we note from the summary picture above, that Q2 2024 had on average 141 transactions happening per day. That was an increase from 97 in Q2 2023 – a 46% increase. The average transaction volume per day decreased from 55.90 BSEK in Q2 2023 to 60.43 BSEK – an 8% increase and approximately 4.5 BSEK higher volume per day. That is a significant increase in volume.

In the chart below, we zoom in on the development of daily number of transactions and daily average volume per month. We see that there is a clear trend where the number of transactions per day is increasing, and there were on average 143 transactions per day in May 2024. Ignoring the first months after the launch, the volume goes up and down between approximately 50 BSEK and 65 BSEK per day. It can be concluded that there are more, but smaller, transactions happening per day now compared to before.

Summary

The SWESTR remained flat for 7 consecutive months around 3.9%, but in May 2024 it decreased to 3.6%. There are more and more transactions happening each day with the SWESTR – in May on average 143 per day, which is an increase by 54% compared to May last year. At the same time, the average daily volume was 60.2 BSEK in May, which is an increase by 12% compared to May last year.

On the development of SWESTR in March and Q1 2024

We analyse the development of the Swedish krona Short-Term Rate (SWESTR) in March and Q1 2024. The SWESTR is a reference rate that can be used for setting rates between banks, and it is based on transactions happening in the financial market. We do the analysis with support from a Power BI report, which we have developed and which is available in our Portfolio. For more information on the SWESTR, please see our previous blog post or the Swedish central bank’s website.

March 2024 overview

We filter the Power BI report to only show data before the 1st of April 2024. We then see in the picture below an overview of the SWESTR development. As an example, we see that March and Q1 2024 ended with the SWESTR at 3.895%. From our blog post on the February development, we notice that this is the same as February, which also ended at 3.895%. The SWESTR has increased by 1.005% points compared to one year ago.

The chart in the upper-left corner presents averages calculated over 1 to 6 months. We see that all averages are slightly below 4%, just like we concluded in the February blog post.

SWESTR trend

In the bottom left chart, in the picture above, we see that the rate with which the SWESTR increases, has slowed down. At the end of Q1 2024, the SWESTR was at 3.9%, and it was unchanged compared to the end of Q4 2023.

To further review the trend over time, we zoom in on the development per month. We then see that 6 months in a row have ended at 3.9%. The policy rate was increased from 3.75% to 4.00% from the 27th of September 2023. After that increase in September, there has been no change to the policy rate so the SWESTR is aligned in that sense. However, it is 10 bps lower at approximately 3.90%.

Number of transactions and SWESTR volume

We also review the number of transactions and the SWESTR volume in monetary terms. First, we note from the summary picture above, that Q1 2024 had on average 132 transactions happening per day. That was an increase from 80 in Q1 2023 – a 64% increase. The average transaction volume per day decreased from 61.72 BSEK in Q1 2023 to 53.06 BSEK – a 14% decrease and approximately 8.7 BSEK lower volume per day. That is a significant decrease in volume.

In the chart below, we zoom in on the development of daily number of transactions and daily average volume per month. We see that there is a clear trend where the number of transactions per day is increasing, and there were on average 136 transactions per day in March 2024. Ignoring the first months after the launch, the volume goes up and down between approximately 50 BSEK and 65 BSEK per day. It can be concluded that there are more, but smaller, transactions happening per day now compared to before.

Summary

The SWESTR has remained flat for 6 consecutive months around 3.9%. There are more and more transactions happening each day with the SWESTR – in March on average 136 per day, which is an increase by 61% compared to March last year. At the same time, the average daily volume was 59.2 BSEK in March, which is a decrease by 4% compared to March last year.

On the development of the SEK exchange rates & bond yields in March and Q1 2024

We analyse the development of the Swedish krona (SEK) exchange rates & bond yields in March and Q1 2024. We do the analysis by using a Power BI report, which is available in our Portfolio.

March 2024 overview

We filter the Power BI report so that only data up until and including 31st of March 2024 is included. We then start by going to the page with the exchange rates development, where we see that SEK weakened in March against all the currencies in the report. It weakened the most – by 3.0% – against CAD, GBP and USD and by 2.9% against EUR and DKK. In the period of just one month, this is a significant development of the exchange rates.

We then click on March in the table and the page is filtered with March as a filter. The chart below shows the percentual development in March 2024 only.

We see on the summary page that the bond yields have increased significantly year-to-date (YTD) for most of the bonds in the report. However, in March there was a clear decrease in most bond yields. For example, the SEK 10 years yield decreased by 20 bps in March and GBP 10 years yield decreased by 16 bps. The USD yields increased in March – 5 years increased by 6 bps and 10 years by 2 bps.

Q1 2024 overview

For the first quarter, the SEK strengthened against several currencies to begin with, up until March. We also described this in our post on the February 2024 SEK exchange rates development. In March, however, SEK weakened and this is largely the trend YTD as well. So far in 2024, the SEK development is within the range -2% to 5%. Some notable SEK exchange rates changes so far in 2024 are:

• Strengthening against JPY by 1.6%
• Strengthening against CHF by 1.6%
• Weakening against EUR by 3.3%
• Weakening against GBP by 4.7%
• Weakening against USD by 4.7%

The bond yields have increased during the quarter for all bonds in the report. For example, SEK 2 years yield increased by 41 bps and the 10 years by 22 bps. The GBP 10 years increased by 30 bps and USD 10 years by 27 bps.

With regards to the bond spreads, that is, the difference between short-term bonds and long-term bonds, decreased in the quarter for SEK. The 2s10s bond spread decreased by 19 bps to -0.38%, meaning that the 2 years yield increased more (+41 bps) than the 10 years yield (+22 bps).

Summary

In March 2024, the SEK weakened against several large currencies. For example, it weakened by 3.0% against both GBP and USD and by 2.9% against EUR. Bond yields decreased in March for all the bonds in the report except for the USD and JPY. For example, the 10 years SEK yield decreased by 20 bps in March.

While SEK started the year strengthening against several currencies, it has now weakened against large currencies like EUR (3.3%), GBP (4.7%) and USD (4.7%) and strengthened against for example JPY and CHF (1.6%).

On the development of the SWESTR in February 2024

We analyse the development of the Swedish krona Short-Term Rate (SWESTR) in February 2024. The SWESTR is a reference rate that can be used for setting rates between bank, and it is based on transactions happening in the financial market. We do the analysis by using a Power BI report, which is available in our Portfolio. For more information on the SWESTR, please see our previous blog post or the Swedish central bank’s website.

Overview

We start by filtering the Power BI report so that it only considers data before the 1st of March 2024, which is an option only accessible to us as report creators. We then see in the page below that the last published SWESTR is 3.895%, which was published at the 29th of February. That is an increase of 99.8 bps compared to one year ago.

The chart in the upper-left corner presents averages calculated over 1 to 6 months. We see that all averages are slightly below 4%. We also see clearly that the SWESTR has increased steadily since its launch in 2021.

The SWESTR trend

In the bottom-left chart above, we see that the rate with which the SWESTR increases, has slowed down. Since Q4 2022, the increases measured at the end of each quarter, have been:

• Q4 2022 to Q1 2023: 0.5%
• Q1 2023 to Q2 2023: 0.5%
• Q2 2023 to Q3 2023: 0.3%
• Q3 2023 to Q4 2023: 0.2%
• Q4 2023 to 2024 YTD: 0.0%

To further review the trend over time, we can zoom in on the development per month. We then see that 5 months in a row have ended at 3.9%.

Number of transactions and SWESTR volume

Finally, we review the number of transactions and the SWESTR volume in monetary terms. First, we note in the overview picture above, that so far in Q1, there are on average 130 SWESTR transactions happening per day. That is an increase by 62% compared to the same quarter last year. On the other hand, we see that the average volume per transaction is 0.4 billion SEK, which is a decrease by 50%. So, there are more transactions happening but the transactions are smaller on average.

In the chart below, we zoom in on the transaction and volume development per month. There is a clear trend where the average number of transactions per day is increasing.

For February specifically, the average volume per day was 51.5 billion SEK – a decrease by 26% year-over-year. Similarly, the number of transactions in February was at 131, which was an increase by 65% year-over-year. Compared to January, the daily number of transactions was approximately the same with just a 1% increase. The volume increased from 49.0 to 51.5 billion SEK – a 5% increase.

Summary

The SWESTR has remained flat for 5 consecutive months around 3.9%. There are more and more transactions happening each day with the SWESTR, as evidenced by the daily number of transactions clearly trending upwards. In February, there were on average 131 transactions per day, which is a 65% increase compared to February last year. At the same time, the average daily volume was 51.5 billion SEK, which is a decrease by 26% compared to February last year.

On the development of the NOK exchange rates & bond yields in February 2024

We analyse the development of the Norwegian krone (NOK) exchange rates and bond yields in February 2024. We do so by using a Power BI report that is available in our Portfolio. The source of all data is the Norwegian central bank – Norges Bank.

February 2024 overview

We start by going to this page and expanding the table so that the development in each month is visible. Then we click on February and consequently the whole page will be updated with February as a filter. This is a convenient way to filter without having explicit filters visually present in the report, which shows how dynamic Power BI is.

We then see that, in February, NOK strengthened against two currencies – Canadian dollar (CAD) and Japanese yen (JPY). Similarly to what we reported in our blog post on the January development, there were no dramatic changes of the NOK exchange rates in February. In February, all movements were in the range from -1% to 2%. It can be noted here that + means that NOK weakened, and – means that NOK strengthened. For example, if the EUR-NOK exchange rate goes from 10 to 11, that +1 change is a weakening of the NOK.

We note that NOK weakened the most – by 2.2% – against Swedish krona (SEK). We noted in our blog post on the SEK’s February development that SEK strengthened against many large currencies like CHF, EUR, GBP and USD. However, NOK weakened in February by 0.7% against GBP and by 1.0% against USD.

Year-to-date (YTD) in 2024, NOK has strengthened against Australian dollar (AUD) by 1.6% and against JPY by 3.0%. All movements YTD are in the range from -3% to 3%.

We then look at a summary page of the exchange rates in conjunction with NOK bond yields. First, we filter the page so that it only considers data before 1st of March 2024. We then see that there were large increases in the bond yields in February. For example, the 3 years bond yield increased by 43 bps to 3.91% and the 10 years yield increased by 32 bps to 3.80%. On the other hand, the bonds with short duration increased by smaller amounts. For example, the 6 months yield only increased by 4 bps to 4.51%, which is close to Norway’s current policy rate at 4.50%.

Year-to-date, the bond yields have increased significantly, and some examples are:

• 3 years: +59 bps to 3.91%
• 5 years: +53 bps to 3.76%
• 10 years: +55 bps to 3.80%

Finally, we review the bond spreads, which are the differences in yields between shorter-term bonds and longer-term bonds. For example, a common financial metric is to measure the difference in yield between a 5 years bond and a 10 years bond. We see that the 3s10s bond spread decreased by 12 bps to -0.10%, since the 3 years yield increased by 43 bps but the 10 years yield only increased by 32 bps.

Summary

In February 2024, there were no dramatic changes of the NOK exchange rates against major currencies like GBP, EUR, JPY and USD. The NOK weakened by 2.2% against SEK and by 1.1% against EUR. Meanwhile, the NOK strengthened by 1.1% against JPY.

With regards to the bond yields, there were large increases in the NOK bond yields in February. The bonds with short duration (3 – 12 months) barely moved but the ones with longer duration increased more, for example the 10 years yield increased by 32 bps in February.