With Sweden's QE Officially Broken, The Riksbank Doubles Down: Lowers Rates Even More Negative; Boosts QE

Tyler Durden's picture

It was precisely one week ago when we described how, for the first time in history, QE had officially failed to achieve its stated objective of pushing yields lower (ignoring that the real purpose is to push stock prices higher). In fact, it the outcome was precisely the opposite because as a result of the ongoing QE by Sweden's Riksbank, and not enough collateral, the "soaking up" of eligible debt made the market so illiquid, buyers were unwilling to touch the bonds until yields rose enough to offset the liquidity risk.

As Danske Bank explained: “Swedish rates continue to trade strong relative to Germany because of a lack of material in the repo market as a result of the Riksbank’s QE program.”

We added that the Riksbank targets about $10 billion in government bond purchases as it tries to revive consumer-price growth after months of deflation. That’s about 14 percent of the market or 3 percent of Sweden’s gross domestic product.

And the punchline: "any efforts to expand asset purchases would deplete Sweden’s already limited sovereign debt supply", SEB AB and Danske Bank have said.

This also came just days ahead of the latest BIS semiannual report in which it blasted central banks for engaging in wanton, endless QE which has pushed stocks to all time highs only at the expense of bond market liquidity.

So what did the Swedish central bank do? Overnight the Riksbank confirmed that it neither learns from its own mistakes, nor reads BIS reports when at 9:30 CET, it shocked central bank watcher all of whom were expecting no rate change from the bank, and announced it is not only engaging in yet another rate cut, taking the key rate even further into record NIRP territory, from -0.25% to -0.35%...


... but adding insult to broken QE injury, it would expand its QE by a further SEK 45 billion starting in September. The reason? Sweden is realizing it is losing the currency war (to a great extent due to its failed QE which is pushing bond yields higher and with it, its currency) and it needs to soak up even more collateral... which can barely be found.

From the Riksbank:

Inflation is rising and economic activity in Sweden is continuing to strengthen. But uncertainty abroad has increased and it is difficult to assess the consequences of the situation in Greece. Since the repo-rate decision in April, the krona has also become stronger than the Riksbank had forecast and the development of the exchange rate remains a risk to the upturn in inflation. In this uncertain environment, monetary policy needs to be even more expansionary to ensure that inflation continues to rise towards the target of 2 per cent. The Executive Board of the Riksbank has therefore decided to cut the repo rate by 0.10 percentage points to -0.35 per cent and to extend the purchases of government bonds by a further SEK 45 billion with effect from September and until the end of the year.

The central bank then had some philosophical observations on the state of the world:

International growth is also rising. In the euro area, economic activity is strengthening, but the events in Greece over the past few days have substantially increased the uncertainty. The consequences of the situation in Greece for the euro area as a whole and for Sweden are difficult to judge.


Since the Riksbank's most recent decision in April, the krona has strengthened more than expected against several currencies. If the exchange rate were to be too strong in relation to the Riksbank's forecast, prices of imported goods would increase more slowly and demand in the Swedish economy would fall. Such a development would risk breaking the upturn in inflation that has now begun.

And since the Riksbank should certainly realize by now this latest move will only exacerbate its problems, it had no choice but to issue its usual latent threat:

The Riksbank still has a high level of preparedness to make monetary policy even more expansionary if necessary, even between the ordinary monetary policy meetings. The repo rate can be cut further and the government bond purchases can be extended. The Riksbank is also prepared to intervene on the foreign exchange market if the upturn in inflation is threatened as the result of, for instance, a very problematic development in the markets. The purchase of other types of securities and the launch of a company lending programme via the banks may also come into question.

So Swedish QE is broken, but the central bank will be delighted to do even more of it to achieve precisely the opposite outcome of what is desired.

Because, as is increasingly obvious, to central banks the New Paranormal motto has become simple: "if it is broken, break it some more."

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JustObserving's picture

"if it is broken, break it some more."

All markets are manipulated by Central Banksters as the real economy plays no part in determining rates or prices.  This can only end in disaster.

All countries want instantaneous wealth generated by a surging stock market.



VinceFostersGhost's picture



Keep checking my mailbox for my QE....nothing yet.

Haus-Targaryen's picture

Dear Central Banks of the World, 

Please feel free to stimulate my bank account whenever you so desire.   

onewayticket2's picture

"this Senior obama official told me the plan was...quite simply....to kill the dollar"


- kyle bass

ThirdWorldDude's picture

Silly Wabbit, haven't you learned anything from these past 8 years?

Stimulus is for corporations; serfs are only eligible for a haircut.

stocktivity's picture

One of these years, QE won't work.

VinceFostersGhost's picture



Someday they'll have to pay someone to haul all the damn paper away....I'll be set.....I have a pickup.

fukidontknow's picture

If QE was really about making inflation to ease debt loads central banks would use it to buy GOLD.

VinceFostersGhost's picture



No, they use your grandkids future tax dollars to drive it lower....then they buy it.


There is a method to their madness.

Jumbotron's picture

Dammit  Sven.  We have a fire here.  Quick, pour some gasoline on it !

Downtoolong's picture

The Central Bank Motto:

"We print to fail, but, never fail to print". 

Monetas's picture
Monetas (not verified) Jul 2, 2015 7:16 AM

Riksbank .... Swedish for Reichsbank ! Sweden .... neutral in WW I, WW II .... pro-Islam in Jihad .... they are some weird fucks !

Rubicon's picture

If "neutral" means supplying Nazi's with raw materials to build their war machine and giving them free passage to Norway then yes they were neutral.

CTG_Sweden's picture


I think that Sweden´s position during the WWII was perfectly legitimate. The Swedish government estimated that war with Germany would mean about 200,000 dead soldiers. Among those soldiers would probably my paternal grandfather have been found. He was stationed exactly where the Germans planned to march from Norway to Stockholm in case Sweden would refuse to meet the German demands. Although he blamed Germany for the war, and even refused to buy German cars after the war, he definitely did not want to fight Germany as some fanatics did. In 1943, when Germany had been weakened enough, Sweden no longer permitted free passage to Norway and Finland. Also keep in mind that some mainstream American and British politicians did not want to fight Germany. Some examples: The Republican senators Robert A. Taft and Hiram Johnson, the conservative British foreign secretary lord Halifax and the French socialist foreign minister Georges Bonnet. I think that their position was legitimate. Why should it be more legitimate to co-operate with the Soviet Union, which already had executed millions of people and starved millions of people to death in Ukraine, than being neutral against Nazi Germany which as late in 1941 had not even begun to exterminate people on a large scale?

But the fact that Sweden continued to sell iron ore to Germany after 1943 seems to be something that Sweden should be punished for today. Some people consider Sweden as a Nazi Collaborator just like Louis Renault. His company, Renault, was confiscated by the government after WWII. Some people seem to think that Sweden should be punished in the same way. Perhaps that can at least partially explain the economic and social punishments Sweden has been subject to over the past 25 years.

SheepRevolution's picture

It's called being a coward.

I am from Sweden, and it's appalling to see the low-principle/low-moral attitude among Swedes, not having the courage to stand up for any true values/morals. Instead, most Swedes are just standing by and watching todays predators (Jihadists, Washington, Brussels) taking advantage of the country. Everybody seem to be terrified to opposse anything or anyone simply because one might me disliked and perhaps take some consequences. It's pathetic. It was the same thing in WW2 with the Germans and Soviet Union. They just stood by watching these dictatorships slaughter innocent people, trying not to poke either of them in self-pervation, while many other countries had courage, took stance and stood up and fight. Even my grandfathers from former Yugoslavia stood up against Nazi-Germany, despite them being very poor and barely had any weapons.

It's embarrising to be calling myself Swede when I visit other countries. This whole nation is a nation of cowards sucking on the socialist welfare government milktitties...

Calculus99's picture

Diksbank more like.

Monetas's picture
Monetas (not verified) Jul 2, 2015 7:20 AM

The real poor .... people who believed FDR .... worked all their lives .... and are trying to make it .... on Social Suck !

buzzsaw99's picture

at least they will never get greeked, and that's a good thing.

firstdivision's picture

Apparently the oldest CB in the world has dementia and alzheimers

NoWayJose's picture

The perfect statement to show that bankers are insane -- So the stronger currency will lead to - "prices of imported goods would increase more slowly and demand in the Swedish economy would fall." Only momentum driven algorithms and bankers think that higher prices cause more demand!

Sages wife's picture

"QE will continue until fiscal responsibility is restored!"

- the fed/ecb/imf/.....

Monetas's picture
Monetas (not verified) Jul 2, 2015 7:28 AM

"Malmo" .... the sound a Swede makes .... when he tries to say Mama .... with a Somali dick in his mouth ! Anders Behring Braevik knew what to do !

Baldrick's picture

so you're telling me the bank that created the "nobel" for economics fucked up? huh!

ncdirtdigger's picture

Makes me think of the Sawyer Brown song 'The race is on' and here comes pride in the backstretch...........
Which currency will win the race to the bottom?

shovelhead's picture

All the college and post college crowd don't need IKEA furniture and stuff if they live at Mom and Dads place.

Gotta make that crap cheaper than Chinese crap.

NoWayJose's picture

Check the 'made in' labels at IKEA - there is plenty of 'designed by a Swede' but 'Made in China'

shovelhead's picture

True, but the 'stylishly minimalist' Euro-chic design is the Swedish export add on that brings home the bacon.

IKEA probably spends as much on consumer psychology studies as they do on design.

IKEA would put the Marlboro Man in black, tight skinney-leg jeans with a rainbow scarf.

25or6to4's picture

The only thing "Made in Sweden" at IKEA are the meatballs and pepparkakor and I'm not so sure about the origin of those ingredients either.

ThirdWorldDude's picture

I can't guarantee for the ginger cakes, but IKEA's meatballs come from Mr. Ed's cousin.

25or6to4's picture

Yes I've read about that but horse meat is an improvement over the Hormone, GMO fed , anti biotic soaked meat we call beef here in the US.

NoWayJose's picture

The machines, attempting to go back into the past to crush human opposition, were frustrated several times by Sarah Connor, John Connor, and earlier version of their Termintor series -- until the machines finally took control of banking computers and inflicted QE onto the humans.

Quinvarius's picture

Yep.  The victims can keep harping on that whole deflation thing, which has never in the history of fiat been a problem, while the printing presses find new ways to explode money. 

FranSix's picture

Swedish bills must be trading with negative rates vs. their ten year bond. That would be called a 'steepening' if their yield curve. If the 'steepening' of the yield curve in the U.S. is to continue, you need negative rates on treasury bills.

There had been an inverting yield curve for months on end with a rise in the U.S. Dollar against the Euro, and the increasing spread between U.S. Treasury Bills against Euro-denominated longer-term bonds.

chinaboy's picture

Dumb and dumber!

Brazen Heist's picture

So global interest rates are are record lows, and have been hanging there for years and years.

So when the next crisis comes, how much lower can they go? or have they hit the floor? The next crisis will prove to be decisive, as central banks will already be stretched and unable to cope. Hopefully its the ultimate blow to a rotten world order that is in dire straights for new ideas and governance.

hendrik1730's picture

Correct. ALL central banks are out of ammo now and still there is NO GROWTH. On the contrary, I see only collapsing buying power as well for the oldies as for the young ones. And rising debt levels, everywhere. And record margin debt. And record assets buy-backs with borrowed money at big blue-chip Cies. And increased leverage, everywhere. This ends BADLY ...

BoPeople's picture
BoPeople (not verified) Jul 2, 2015 8:55 AM

Someone once told me that you cannot fix stupid with more stupid.

I believe that one also cannot fix corruption with more corruption and one cannot fix bad decisions with more bad decisions.

gcjohns1971's picture

With the Central Banking branch of the world-wide Central Planning Machine delivering such poor results...

...why do people continue to call for more centralization as the answer?

losses mount's picture

I've got a bad idea that might fix it.

Take the square root of the negative interest rate then multiply by the dollars to be paid; and hey presto you pay in imaginary dollars. Then, then, we can all be imaginary rich, wow can I have my Nobel prize now?

To be called the Squarely rooted program.

q99x2's picture

Banksters are like pedophiles. They can't stop until they are locked up.

fowlerja's picture

I guess money cannot buy happiness when you have to pay to keep your own money...

California Nightmare-ing's picture

Just bring back "Nasty"

It will make me feel better