A Desperate Sweden Looks To "Fix" Broken QE With Massive Muni Monetizing Madness

Tyler Durden's picture

Way back in June we documented the “curious” case of Sweden’s broken QE and when we used the term “broken”, we didn’t just mean that inflation expectations weren’t moving higher. We meant that bond yields were rising and the SKE was strengthening. 

How was this possible, you ask? Simple. In the minds of market participants, the expectation of further price appreciation thanks to Riksbank purchases was outweighed by the risks associated with falling liquidity and a lack of market depth. Put differently, any incremental bond purchases will start raising yields as the adverse impact from the illiquidity "premium" surpasses the price appreciation benefit from frontrun central bank buying.

Here’s what Roger Josefsson, chief economist at Danske Bank in Stockholm told Bloomberg at the time: “The financial conditions -- the currency and the bond yields -- are moving in the wrong direction. The assumption is that the Riksbank wants yields to go down and the krona to weaken, but it’s been the opposite direction recently. That should pose a problem. 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.”

Of course all types of bad things can happen when you start impairing the functioning of the repo market and although the above clearly represents an abrupt transformation of the virtuous QE loop into a very non-virtuous, self-defeating death spiral, the Riksbank went and doubled down less a week later, driving rates further into NIRP and expanding QE.

As we said at the time, the explanation for this apparent insanity is with the ECB and the BoJ still in full-on easing mode, the Riksbank can’t afford to be left behind in the race to the bottom, because if the krona moves higher, inflation targets won’t be hit. 

This is the same reason we said the Riksbank was taking a big risk to remain on hold in early September just hours ahead of an ECB decision which some market participants thought might include the announcement of more QE. 

Well, don’t look now but the Riksbank looks set to “solve” the broken QE problem and by extension ensure it can stay in the currency war games by expanding the list of eligible assets to muni bonds. Here’s Bloomberg:

Swedish central bankers are now looking at the country’s 240 billion-krona ($30 billion) municipal bond market as a possible channel for further stimulus as its debt purchases risks distorting trading in government debt.


Riksbank Deputy Governors Martin Floden and Cecilia Skingsley on Tuesday said expanding purchases to also include municipal bonds could be an option if further measures are needed to lift inflation. Both said an even more expansionary monetary policy may be required as risks abroad are increasing.


While rates can be cut further and bond purchases expanded, “there’s of course a floor for the repo rate and a ceiling for the purchase of bonds,” Floden said. The “aim after all is to get inflation up in an orderly manner.”


Extending purchases to also include municipal bonds would add a market of 230 billion to 240 billion kronor of krona-denominated assets, according to Charlotte Asgermyr, an analyst at SEB in Stockholm. The Riksbank could probably spend some 50 billion kronor on purchases of municipal bonds, she said.


Jussi Hiljanen, head of fixed income strategy at SEB in Stockholm, said the Riksbank may have to start looking at other assets as any further extension of government bond purchases could start hurting how the market functions.


The “purchases have reduced liquidity in the market quite a lot and from that perspective, it’s becoming rather limited in terms of how much more it can buy,” he said by telephone on Tuesday. “The next step if the Riksbank would need to extend bond purchases would be to buy other assets and in such a scenario, it’s municipal bonds that would be very, very relevant.”

But the irony here is that although the ECB didn't announce an outright PSPP expansion in September, what Draghi did do is give the central bank a bit more breathing room by raising the issue share limit from 25% to 33%. And don't forget that going forward, nothing says the ECB won't ultimately become more generous in determining what ultimately counts as a "monetizable asset." And don't forget: the ECB already buys agency paper (i.e. assets other than sovereign debt). In other words, the Riksbank is already behind the curve. 

In the end, none of this matters. That is, because this a never-ending race to the bottom that requires central bankers to remain wedded to beggar thy neighbor policies, all that will happen here is that the Riksbank will be forced to monetize more and more muni bonds until the functioning of that market is impaired too. Ultimately, central banks will enslave and subsequently break every market they can in an effort to avoid the situation the Fed is now in (i.e. headed towards policy divergence with the rest of the DM world) until there are no more monetizable assets left anywhere.

And because it is now obligatory when it comes to Sweden...

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10mm's picture

Is this the same Sweden Bernie(Everything For Free) Sanders touted last night. Bernie, your late to the party and a fiat dollar short.

TBT or not TBT's picture

While Sweden has a generous welfare state and high taxes etc, it apparently has a less cronified, freer competition in its private sector than we have in America.  

Cognitive Dissonance's picture

Speaking with no specfic insight of Sweden whatsoever, I suspect those most nurtured and coddled by the state will have a State (of) Mind. It is hard to get someone to reject the very State (of) Mind that supports it.

TBT or not TBT's picture

Indeed.  They are proud of their wealth re-distribution, but they are arguably less socialist in practice than we are, pace people like Bernie Sanders and his stoner college kids / hippie burnout followers. Kevin D Williamson wrote a nice piece on this theme in the last few months, skewering American socialists frequent references to scandy countries as to what they want for America.   We already have a pretty extensive welfare state in the USA, as the FSA behavior shows us every day.  But do we have more free or less free competition, more or less regulated private sectors than the countries we often hear branded as "socialist"?   In the case of Sweden, the answer may well be less free and more regulated, in many sectors.  

Beatscape's picture

Q: Are they restricting muni purchases to Swedish munis, or munis anywhere in the world? This has major implications for the muni bond market. 

Pure Evil's picture

Sex is never free. You have to pay one way or another.

justdues's picture

Sweden ,free sex indeed , second highest per capita rape stats in the world (no prizes for guessing why) musl cough cough imigr cough cough

COL Jackson's picture

The religion of peace will really enjoy themselves in Sweden.  Raping and pillaging is a lot of fun with hotties like that.  At least until the blondies run out.

SheepRevolution's picture

I'm from Sweden, and you are 100% correct. Most Swedes are completely indoctrinated into the Welfare State model with social democracy (european style). I myself am a libertarian, which is extremely unusual here in Sweden. When I talk about my views people often get angry and take one for being a complete idiot, despite the swedish society has been going sout for at least the last 45 years. Private households are drowning in mortgage debt, QE is as ZH mentioned a complete failure (the inflation is in the housing sector, which the Riksbank doesn't take into account in CPI), the local goverments have huge deficits, the state/head government has a huge deficit. And at the same time the entire welfare sector is in huge need of more money despite the taxes being sky-high for decades.

Once something severe happens abroad - like a stock market crash in US - it's game and party over for Sweden. But worst of all, the people aren't changing their values even the slightest even though all this is happening right in front of their eyes.

Cognitive Dissonance's picture

Sounds like we are headed for a universe of pain. Thank heavens the Martians are not on the same Ponzi cycle as we are or the US might just start a War of the Worlds. :-)

Pure Evil's picture

Sometimes it takes a bullet to the back of the head to get people to change their ways.

SheepRevolution's picture

Swedes will not change their views on social democracy until the welfare state collapses completely. Even then a large part will be leftist. It's difficult to describe in words how large of a majority are super-pro welfare state/socialism.

COL Jackson's picture

They will change their ways when the last social democrat gets his head chopped off for offending Allah with his blasphemy.

monk27's picture

It looks like the Swedes discovered a cheaper way for anti-submarine warfare, applicable only against Russians:


I wonder if it works... LOL !

zvzzt's picture

Being from Holland I can agree with about 99.9999% with what SheepRevolution said. Wanting to add, strangely enough most Dutch still look up to the USA as a beacon (or hell) of free markets. "Please lets not be as harsh as the Americans', concerning job opportunities and welfare. Interesting and disconcerting at the same time.  Funny thing is (funny as "funny with a nail in your head'), USA is a lot more socialist now than most of Western Europe. Themes here: less subsidies, less child support, lower basic coverage on health care etc. 



johnconnor's picture

I love Sweden and Scandinavia as a whole, I have been several times for work... we need more guys like you. How can Swedish be okay with negative interest rates and with this horde of Muslims and negroes raping your women and sucking the welfare state dry!? Wake them up! you guys descend from Vikings!

10mm's picture

They also have a population in the single digits. We on the other hand, not so much.

TBT or not TBT's picture

They are finally getting multicultural in real numbers though, and US media will not talk about how that is panning out, exactly as they havent done about France's archiplegao of simmering anti-western slums ringing every city there, collectively called La Zone, where French rule of law barely treads.  

hannah's picture

there are two major points that need to be looked at with all these socialist wonderlands. one is that the usa has funded a lot of their history either directly or indirectly. an example, the us funding of world orgs like th eunited nations. they dont pay a fair share. same as nato. so they are on us welfare.


 the second point is that they havent had a race issue. nowthey will. funny how these countries always talked about the us crime rate without splitting out the black compnonent. now they get to dance with the darkies and see how they like the 'ghetto lifestyle'....

DadzMad's picture

Exactly!  Nobody ever talks about scandi welfare in the context of population.  The welfare state that is my household works pretty well with two working parents and one kid.  Now give me seven more kids and I'm as fucked as the US.


ThirdWorldDude's picture

Less cronified? That's because you don't have enough knowledge on the subject.

Meet the Wallenbergs, the family that literally owns Sweden (at least 60% of it) and regularly attends Bilderberg meetings. Meet Swedish media, which, oddly enough, is also controlled by Jews.

Btw, don't forget Brzezinski Jr. is the current USSA ambassador in Stockholm.

TBT or not TBT's picture

Interesting counterpoint.  Thanks.  

Polymarkos's picture

They have no 'private sector.' They're socialist, moron.

JustObserving's picture

May I suggest Chicago and Detroit muni bonds?  Even Puerto Rico muni bonds will do.

Next you may want consider buying used Volvos and Saabs.

TBT or not TBT's picture

Also, they're importing hordes of military age muslims from war torn regions and they are proud of themselves for doing so.  

CuttingEdge's picture

Added to which Stockholm is now rape central in Europe (courtesy of the ethnicly divergent you mention), and pretty girls like "nasty" above will be cowering in their homes.

Bullionaire's picture

I found the pendant and the tat to illustrate a marvelous cognitive dissonance

TBT or not TBT's picture

It's a profound statement on the duality of man. /Joker from FMJ

TBT or not TBT's picture

Like French women, "nasty" knows there are plenty of places in her country where she should not go uncovered, or should really just better not go.  It's the ordinary reality over there, the facts on the ground.   Nevermind though, america needs more diversity too and muslims are way underrepresented.   

godiva chocolate's picture

Perhaps a better title would be "A Desperate Sweden Looks To "Fix" Broken QE With Massive Muzzi Monetizing Madness"

KnuckleDragger-X's picture

The CB's answer to everything is always 'print more money' since if all you have is a hammer, the whole world looks like a nail.....

Spitzer's picture

Swedish people are a collectors item. Has any country ever gone this far to eliminate themselves ? Its all the worst policies of each part of the world being practised in one country.

TBT or not TBT's picture

Plenty of Swede DNA doing well in the USA.  As long they dont start importing hordes of Muslims to Minnesota.  Oh, wait.  Shit.  

yogibear's picture

The Federal Reserve prints ever more until there is a dollar crisis.

Not hard to see where this is going.

Dr. Engali's picture

I thought moar "refugees" was supposed to fix this problem.

Pure Evil's picture

Don't worry, once the refugees have either bred or genocided the native population out of existence then, yes, the problem will have been fixed.

Kaiser Sousa's picture

coming to a wall st., banker fuck soon....


"An angry Chinese investor stabbed the chief executive of a troubled asset management company into which he had poured hundreds of thousands of yuan, reports said, highlighting tensions created by the country's financial turmoil.

Wang Jie remained hospitalised on Wednesday, his company Global Wealth Investment (Beijing) told AFP, after a meeting of investors to discuss losses turned bloody.

The attacker sat next to Wang at the gathering and "pretended that nothing was wrong", an eyewitness told Chinese financial news outlet Caixin, before suddenly pulling out a knife and stabbing the CEO in the left shoulder, leaving him with a 15 centimetre-long wound.

The assailant, who had invested 300,000 yuan ($47,000) in a product that has failed to pay out, was held by police on suspicion of intentional homicide, Caixin reported.

The incident is a demonstration of how investor losses in China's murky and volatile financial system can lead to tensions and even violence.

“We’re not just facing financial pressures -- it’s difficult to even protect our personal safety,” a source close to Global Wealth told Caixin."


RaceToTheBottom's picture

I think that they should come up with a new Visa program specifically aimed at importing more chaps like this one.

H1 Killers

Sergeiab's picture

At some point I though the European civil war would start in France, but Sweden might be first



Agent P's picture

Oooo....she's nasty! 

Pure Evil's picture

Wait till you get her panties off.

She's probably been raped more times than you care to count by the muzzie hordes.

Gamma735's picture

Can Tyler at least post more examples of swedish beauty?

Spungo's picture

This doesn't sound like too bad an idea. If governments are going to print money and blow it on bullshit, I would rather it be handled on a local level. The local government tends to spend money on things like fixing pot holes. The federal government also likes to fix pot holes.... in other countries....... after invading said countries.

Dr. Engali's picture

It's just amazing to me that everyone knows that every sovereign is purposefully turning their currency to shit, yet they are able to keep this charade going. WTF does it take for it to all fall apart?

gcjohns1971's picture


Simple reason would suggest that there is nothing to be gained by holding purposely depreciating currency vice commodities that simply exist.


...Most people are totally unsensitive to reason.

After all, that is what they've been conditioned for over the last century...to be insensible.

Instead they FEEEEEL.

They'll be doing it while they are digging their own graves, right up to the moment when the bullet arrives and they topple in.

gcjohns1971's picture

Nice aliteration in the title.

But the real meat of the article is all in the photo.

The Swedes must be the most genetically gifted people on the planet!

Mark Mywords's picture
Mark Mywords (not verified) gcjohns1971 Oct 14, 2015 11:42 AM


mijev's picture

I was blown away by the eye candy in finland. Iceland may be even better.