The fact that around one third of all Swedish covered bonds are owned by foreign investors is both an opportunity and a risk. The opportunity to spread funding has been positive, at the same time as we have previously seen that foreign investors tend to be the first to sell their holdings in times of unease, and that this can start a sales spiral. We saw this type of selling behaviour in 2007, for instance, when unease on the financial markets increased and the Swedish banks’ exposure to the Baltic countries made investors want to sell the Swedish banks’ covered bonds, which were perceived as high risk.5 Investors then sought safer assets, such as government securities. During the second half of 2007, foreign investors reduced their holdings of Swedish covered bonds by as much as a quarter, from SEK 450 billion to SEK 330 billion.6 It was primarily investors with a short-term investment strategy who withdrew, which meant that bond yields rose. With the exception of the acute global financial crisis, however, the market for covered bonds has functioned well. Foreign investors’ interest in Swedish covered bonds is currently high, which is evident in the low yield levels. But the more the banks become dependent on a particular source of funding, the more vulnerable they become if this market were to suffer problems.
Naturally, we wish to avoid this. But at the same time, I think it is important to begin to take action. In the long run, it is no sustainable for debts to continue increasing at the same pace as today. So why does the Riksbank care about household indebtedness? The Riksbank is concerned about household indebtedness partly because international confidence in the Swedish housing and mortgage markets are necessary conditions for our financial system to function smoothly. Financial developments in turn are linked to developments in the real economy. The indebtedness of Swedish households can thus affect the Riksbank’s conditions to carry out its statutory tasks, price stability and financial stability. It is therefore important that the Riksbank continues to follow developments, analyses and highlights risks linked to household indebtedness. 8  See Barclays 2012. (Over-promising? Encumbrance at European Banks, Barclays Capital Equity Research. 9  See Financial Stability Report 2013:2, Sveriges Riksbank. 8  BIS central bankers’ speeches