Since the Riksbank began reducing its large pandemic‑era bond holdings in 2022, analysts Erik Andersson and Peter Kaplan report that the expected tightening of financial conditions has been muted. The study finds that a significant portion of the central bank’s bond sales has been absorbed by banks and loan‑financed investors, including hedge funds. Their purchases have kept bank deposits stable and prevented a rise in bond risk premiums. The authors note that if hedge funds face tighter financing in the future, their holdings may need to be taken up by investors demanding higher returns, which could increase risk premiums and reduce bank deposits. Recent rises in repo market rates suggest that hedge‑fund financing conditions are worsening.
Source: Sveriges Riksbank.
Data reproduced from https://www.riksbank.se/ (open data).
Open data, freely available.
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