Swedish Index ILB Calculation Method

The Swedish government issues inflation-linked bonds with a zero coupon, and yearly coupon bonds, on December 1. Swedish ILB bonds are linked to the Swedish Consumer Price Index (CPI), with an indexation lag of three months. The principal of Swedish ILB is adjusted daily however principal increases are only paid at maturity. The interest payments are based on a principal amount that is adjusted daily for inflation or deflation, in accordance with the monthly changes in the Swedish CPI. Although the principal is adjusted daily, principal increases for Swedish ILB are only paid at redemption.

Swedish ILBs differ from other countries ILB methodology, as only certain issues (Bonds 3104 and 3105) are safeguarded from deflation and thus guarantee that the principal payment at maturity will never be less than the initial principal at issuance of the security (that is, par value).

Eagle Accounting currently supports ILBs by using the Swedish ILB model. This model has the following attributes:

• Bonds use a trailing-three-month index to mark to market for inflation

• Daily ILB index is calculated to a 6 decimal precision

• Daily iteration of CPI is based on a 30e/360 day count; however, February 28th and February 29^th are not treated as February 30 for daily CPI and Index Ratio calculation

• Certain index linked bonds have the original principal investment is guaranteed, others do not

• Interest accruals are based on the inflation-adjusted principal amount

• Principal is adjusted daily; however, inflationary principal adjustments are only paid at maturity

Calculation of a Swedish Government Inflation Linked Bond Index Ratio

Sweden inflation linked bonds have a day count basis of 30e/360 and thus have a calculation that assumes that all months have 30 days. Therefore, there is no change in the daily CPI and index ratio in months with 31 days. However, if the settlement date is February 28th, it is counted as the 28th and not as the 30th. Similarly, if the settlement date is February 29th, it is counted as the 29th, and not as the 30th.

For more information on how to calculate Swedish Government TIPS, visit the following website: