Danmarks Nationalbank. Danish Government Debt Management Policy Strategy 2012

Transcription

1 Danmarks Nationalbank Danish Government Debt Management Policy Strategy Published 15 December 2011 Translation

2 2 Key Issues, 2012 Domestic issuance requirement Excess sales of government securities in 2011 entail a low issuance requirement in government bonds in In order to reduce the government's refinancing risk the strategy is to begin to finance the issuance requirement for 2013 in 2012 and continue an active buy-back policy. This increases issuance of government bonds in The strategy is to maintain the T-bill programme around the current level. Domestic borrowing There are no changes to the nominal key on-the-run securities in the 1st half of 2012, cf. Table 1. The strategy is to open an inflation-linked government bond in the 10-year segment in the 1st half of 2012 as a supplement to the nominal key on-the-run securities. The bond will be linked to the Danish consumer price index, CPI. Government bonds are issued via regular auctions supplemented with tap sales. KEY ON-THE-RUN SECURITIES, 1ST HALF 2012 Table 1 Maturity segment Key on-the-run issues Outstanding, kr. billion Maturity < 1 year... T-bills year segment... 2 per cent bullet loan year segment per cent bullet loan year segment... 3 per cent bullet loan year segment per cent bullet loan year inflation-linked bond... Foreign borrowing In 2012, the strategy is to issue foreign loans for 1-1½ billion euro. Please direct enquiries to Ove Sten Jensen, on telephone or by governmentdebt@nationalbanken.dk.

3 3 Government debt At end-2011, the central-government debt is expected to be 24 per cent of GDP, cf. Chart 1. The government's gross debt (EMU debt) is expected to be 44 per cent of GDP at end-2011, cf. European Commission, October Unlike in the compilation of central-government debt, the central government's account is not offset against EMU debt. The balance of the central government's account corresponds to 12 per cent of GDP, which can fully cover redemptions and the expected budget deficit in The Danish central-government debt is low compared with that of other EU member states, and Danish government bonds have the highest rating from Moody's (Aaa), Standard & Poor's (AAA) og Fitch Ratings (AAA). CENTRAL-GOVERMENT DEBT, RATIO OF GDP Chart 1 Per cent Note: The estimate for central-government debt end-2011 is from Budget Outlook 2, August 2011.

4 4 Central government borrowing in 2011 In 2011, the central government has issued domestic bonds for kr. 121 billion, which is kr. 75 billion higher than the financing requirement, cf. Chart 2. The excess sales reflect the strategy of reducing the government's refinancing risk. Demand for Danish government securities has been high and the funding costs are low. The T-bill programme has been built up to kr. 44 billion. ISSUANCE OF GOVERNMENT BONDS IN 2011 BY MATURITY SEGMENT Chart 2 Kr. billion Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2-year 5-year 10-year 30-year Issuance requirement, bonds Note: Issuance and financing requirement are accumulated over the months.

5 5 Borrowing Strategy 2012 Low domestic issuance requirement for government bonds Excess sales of government securities in 2011 entail a low issuance requirement in government bonds in 2012, cf. Table 2. In order to reduce the government's refinancing risk the strategy is to begin to finance the issuance requirement for 2013 in 2012 and continue an active buy-back policy. This increases issuance of government bonds in CENTRAL-GOVERNMENT DOMESTIC FINANCING REQUIREMENT, 2012 Table 2 Kr. billion Domestic financing requirement Financing: Issuance of domestic government bonds Issuance of T-bills Excess sales in 2011 and extra withdrawal on the government account Based on Budget Outlook 2, August Excess sales, value date 15 December 2011, and extra withdrawal in light of repayment of early retirement contributions (kr. 17 billion). Domestic borrowing I 2011, new key on-the-run issues were opened in the 2-, 5- and 10-year maturity segment, cf. Chart 3. The build up of the nominal key on-therun bonds continues in the 1st half of DOMESTIC REDEMPTION PROFILE Chart 3 Kr. billion Held by the market Held by the government funds Key on-the-run issues Note: Redemptions exclude Treasury bills. The government funds are the Social Pension Fund, the Advanced Technology Foundation and the Preventive Measures Fund.

6 6 Opening of an inflation-linked government bond In the 1st half of 2012, the strategy is to open an inflation-linked government bond in the 10-year maturity segment as a supplement to the nominal key on-the-run securities. The bond will be linked to the Danish consumer price index, CPI. Other characteristics of the bond will correspond to the European market standard. The investor base of the central government can be expanded by supplementing the key on-the-run issues with an inflation-linked bond. Currently the insurance and pension sector uses foreign inflation-linked bonds to hedge inflation. In addition the insurance and pension sector is expected to have an increasing structural demand for inflation-linked assets, e.g. due to the gradual transition to pension products without nominal guarantees. Key on-the-run securities in the 1st half of 2012 are: KEY ON-THE-RUN SECURITIES, 1ST HALF 2012 Table 3 Maturity segment Key on-the-run issues Outstanding 1, kr. billion Maturity < 1 year... T-bills year segment... 2 per cent bullet loan year segment per cent bullet loan year segment... 3 per cent bullet loan year segment per cent bullet loan year inflation-linked bond... 1 Value date 15 December. Issuance of bonds Danish government bonds are issued via regular auctions supplemented by tap sale. Dates for the next three months' planned auctions are announced at the beginning of each month. The government bonds to be auctioned will be announced no later than three days prior to each auction. The auctions depend on stable market conditions. T-bill programme The T-bill programme is built up to kr. 44 billion in 2011, cf. Table 4. The strategy is to maintain the T-bill programme around the current level. Monthly auctions will be held over T-bills with the first banking day of the month as settlement date. In the auctions with the first banking day in March, June, September and December 2012 as the settlement date, new 9-month T-bills will be opened.

7 7 T-BILLS Table 4 Redemption Outstanding, kr. billion T-bill 2012 I... 1 March T-bill 2012 II... 1 June T-bill 2012 III... 1 September Total outstanding Buy backs The buy-back policy is aimed at reducing the central government's refinancing risk. In addition, buy-backs take place in order to meet the placement requirements of the government funds and to ensure a wellfunctioning market for government bonds. Buy-backs may take place in auctions, switch auctions or via tap. Regular buy-back auctions for 4 per cent bullet loan 2012 will be held on the third last banking day of each month. Buy-backs are published daily at Foreign borrowing The central government raises foreign loans in order to maintain the foreign-exchange reserve. In 2012, the central government has foreign redemptions of 4.2 billion euro (kr. 31 billion), cf. Chart 4. In 2012, the strategy is to issue foreign loans for 1-1½ billion euro. As a starting point a 5-year euro loan will be issued, but foreign loans in dollars can be raised depending on market conditions. FOREIGN REDEMPTION PROFILE Chart 4 Billion euro Note: Redemptions exclude Commercial Paper and currency swaps in relation to Danish Ship Finance.

8 8 Trading and Issuance of Government Securities Danish government securities are issued to and bought back from regional and international banks that have entered into primary dealer contracts with the central government, cf. Table 5. The primary dealers support liquidity in Danish government securities by current quotation of two-way prices. Primary dealers have access to the securities lending facilities of the central government and the Social Pension Fund. 1 PRIMARY DEALERS, JANUARY 2012 Table 5 Primary dealers in government bonds Barclays Bank BNP Paribas Danske Bank Deutsche Bank HSBC J.P. Morgan Morgan Stanley Nordea Nykredit Bank SEB Spar Nord Bank Sydbank Primary dealers in T-bills Danske Bank Nordea Nykredit Bank SEB Sydbank 1 The conditions for the securities lending facility are specified in Terms for the Central Government's and the Social Pension Fund's Securities Lending Facilities, available at

9 9 Information Danish Government Debt Management Policy is a semi-annual announcement from the Debt Management Office at Danmarks Nationalbank. The announcement provides information on objectives and strategies for the management of the debt. This announcement was published on 15 December The announcement supplements the annual publication Danish Government Borrowing and Debt, which gives a more detailed presentation of Danish government debt policy. The annual report describes developments during the preceding year and reports on new issues of relevance to debt management. Danish Government Borrowing and Debt 2011 will be published in Danish and English in February Further information on government debt management can be obtained from the DMO's website: If you register with News Service, you will receive notifications of new information and updates concerning government borrowing and debt. Please direct enquiries to Ove Sten Jensen, on telephone or by governmentdebt@nationalbanken.dk.