Sweden's Riksbank has set a new strategic allocation for its gold and foreign exchange reserves, increasing the weight of US dollar assets and broadening euro-denominated government bond holdings to include France, Spain and Italy, while maintaining its existing currency hedging. The revised allocation is designed to balance contingency preparedness, risk and return and is expected to lift earnings slightly, with an expected gross return of 3.36% (SEK 19.3 billion) and expected net return of 1.75% (SEK 10.1 billion) over a 12-month horizon. Until further notice, the foreign exchange reserves will be allocated 70% to US dollars (from 62%), 17.5% to euros (from 22%), 5% to pounds sterling, 5% to Australian dollars and 2.5% to Norwegian kroner (from 3%), with Danish kroner and Canadian dollars excluded. The euro sleeve will be split across 10% German, 5% French, 2% Spanish and 0.5% Italian government bonds. Currency hedging remains at USD 8 billion and EUR 2 billion, around one-quarter of the reserve, maintained through foreign exchange swaps and subject to limits including total counterparty exposure caps of USD 4 billion and EUR 1 billion and a settlement exposure cap of USD 2 billion per counterparty group. The decision also reiterates sustainability constraints, including a preference for investing in Paris Agreement signatories with an exception for US and German government bonds needed for preparedness, and allows investment in ICMA-aligned sustainable bonds where consistent with liquidity, return and risk requirements. The Markets Department is tasked with implementation, with the transition to be completed by 1 April 2025, supported by a limited tactical mandate and rebalancing rules to keep the portfolio close to target allocations.
Riksbank 2025-04-01
Sweden's Riksbank raises US dollar share of foreign exchange reserves to 70% and adds French Spanish and Italian euro bonds while keeping hedges unchanged
Sweden's Riksbank has revised its gold and foreign exchange reserves, increasing US dollar assets to 70% and expanding euro-denominated bond holdings to France, Spain, and Italy. The allocation balances preparedness, risk, and return, with an expected gross return of 3.36% (SEK 19.3 billion) and a net return of 1.75% (SEK 10.1 billion) over 12 months. Sustainability constraints are upheld, favoring Paris Agreement signatories, except for US and German bonds, and including ICMA-aligned sustainable bonds where feasible.