(Bloomberg) -- Sweden’s outlook for financial stability has improved somewhat as inflation has slowed and the central bank has started to ease monetary policy, the country’s financial watchdog said. 

The assessment from the regulator, Finansinspektionen, is a sign of subsiding concerns that increased borrowing costs and slowing economic activity could set off spiralling credit losses that threaten the country’s financial stability.  

“We are headed in the right direction, and uncertainty has decreased, but the situation is still tough for many households and firms,” Finansinspektionen Director-General Daniel Barr said in a statement on Monday. “It is too early to breathe a sigh of relief, even if there are positive signs.” 

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Stability concerns have been focused to a large degree on the commercial real estate sector, where some highly leveraged landlords have seen their credit ratings deteriorate and funding models fall apart. According to the agency, the situation for property firms has improved in the past six months as they now have better access to financing. In the first quarter, companies in the sector raised more funds through bond issuance than the amounts that came due.  

Real estate companies now have some 18 billion Swedish kronor ($1.7 billion) worth of outstanding bonds that will mature this year, and an additional 73 billion will come due in 2025, Finansinspektionen said. The agency said so far, they have generally been able to handle maturities well, and that is likely to continue, “in particular if there are no major changes to the structure of maturities and the bond market continues improving.”

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