Hjemmeside, oktober 2014 [Kompatibilitetstilstand] til... · 2014-10-16 · • All foreign...
Transcript of Hjemmeside, oktober 2014 [Kompatibilitetstilstand] til... · 2014-10-16 · • All foreign...
DANMARKS
NATIONALBANK
DANISH GOVERNMENT DEBT MANAGEMENT
October 2014
Kingdom of Denmark: AAA, Stable Outlook
• Low government debt
• Current account surplus and net external assets
• Reform-oriented policies
• Strong and transparent institutional framework
• Competitive economy and flexible labour market
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“Denmark’s considerable fiscal flexibility and strong institutional frameworks are conducive to swift policy responses.” [S&P, October 2014]
“Denmark is a wealthy, high value-added and diverse economy. It’s track record of macro-financial stability is reflected by low and stable inflation, current account surpluses and a stable banking sector…” [Fitch, August 2014]
“Denmark's Institutional Strength is scored at 'very high (+)', reflecting the forward-looking, pro-active policies that successive governments have pursued for many years.” [Moody’s, June 2014]
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Outline
1. Government Finances and
Debt
2. Borrowing Strategy
3. Risk Management
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Central-government Debt and Gov. Budget
• Low debt
• Stable debt levels since 2012
• Re-lending – mainly government infrastructure projects – is a large part (20 per cent) of central-government debt
• Low deficits
• Approx. structural balance in 2013
Central-government debt
Source: Danmarks Nationalbank.
Government budget balance
Source: Budget Outlook 2, August 2014
0
5
10
15
20
25
30
35
40
2003 2005 2007 2009 2011 2013
Debt adjusted for re-lending Debt
Per cent of BNP
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EMU Debt
Sources: Danmarks Nationalbank.
EMU debt less the government’s cash reserve, 2002-13
• The government’s cash reserve (equivalent to 9 per cent of GDP) is not included in the EMU debt figures
0
5
10
15
20
25
30
35
40
45
50
EMU debt EMU debt less government cash reserve
Per cent of GDP
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Public Gross and Net Debt
Sources: IMF WEO April 2014 & EU Commission Spring 2014 Forecast.
2013 debt levels across selected EU countries
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Outline
1. Government Finances and
Debt
2. Borrowing Strategy
3. Risk Management
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Danish Funding Rules
Domestic funding rule
• Issuance in DKK to cover the deficit and redemptions of domestic debt
Foreign funding rule
• Issuance in foreign currency to maintain an adequate foreign-exchange reserve and access to markets
T-bills and bonds
Method: Auctions supplemented with tap
Dollar and euro loans
Method: Syndication
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Breakdown of Central-Government Debt
Central-government debt, end-2013
Nominal Amount DKK billion Per cent of GDP
Domestic debt 664 36
Foreign debt 76 4
Pledging of collateral for swaps 4 0
Government funds -95 -5
Central-government’s account at Danmarks Nationalbank -162 -9
Central-government debt 487 26
Re-lending -98 -5
Central-government debt adjusted for re-lending 389 21
Note: A positive (negative) figure indicates a liability (an asset). Source: Danmarks Nationalbank.
• Issuance target of DKK 100 bn. (EUR 13bn.)
• Year-to-date a total of DKK 90 bn. has been issued
• Issuances are targeted at longer maturity segments, primarily the 10-year segment
• T-bill programme: DKK 30 billion (EUR 4 bn.)
• Cash reserve 9% of GDP sufficient to cover more than one year’s financing requirement
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Issuance in 2014
Source: Danmarks Nationalbank.
Strategy for 2014Domestic issuance
0
10
20
30
40
50
60
70
80
90
100
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2-year 5-year
10-year 30-year
10-year index-linked Issuance target kr. 100 billion
Kr. billion
Domestic Securities Issuance Method
• Bonds primarily issued at auctions
• Normally two auctions each month with two bonds at each auction
• Dates are announced 3 months in advance. Papers are announced at least 3 work days prior to auctions.
• No forced biddings by banks
• Bidding through 12 Primary Dealers
• T-bills are issued at auctions
• Normally one each month
• No forced biddings by banks
• Bidding through 5 Primary Dealers
• Switch-facility
• Buy-back auctions
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Bond issuance at auctions
Source: Danmarks Nationalbank.
3-month auction calendar
Note: (*) Tentative dates.
Date
8 October
22 October
5 November*
19 November*
10 December*
0
5
10
15
20
25
8 J
an
22
Ja
n5
Fe
b1
9 F
eb
5 M
ar
19
Ma
r9
Ap
r2
3 A
pr
14
Ma
y2
8 M
ay
11
Ju
n2
Ju
l2
0 A
ug
3 S
ep
17
Se
p1
Oct
15
Oct
12
No
v1
0 D
ec
7 J
an
21
Ja
n4
Fe
b1
8 F
eb
4 M
ar
18
Ma
r1
Ap
r1
5 A
pr
6 M
ay
20
Ma
y3
Ju
n1
7 J
un
1 J
ul
19
Au
g2
Se
p1
6 S
ep
8 O
ct
2013 2014
Kr. billion
Bid Sold
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Strategy for 2014Broad List of On-The-Runs
• Broad list of on-the-run issues
• T-bill programme
• 2-, 5-,10- and 30-year nominal bonds
• 10-year inflation-linked bond
• Inflation-linked bond opened in 2012
• Linked to Danish CPI.
• Other features follow international standards, e.g. deflation floor.
• Current outstanding (October): DKK 35 bn.
• Included in Barclay’s global inflation-linked index.
• New 10-year nominal bond (1,75 per cent 2025) was opened 20 May 2014
• Current outstanding (October): DKK 33bn.
Domestic redemption profile
10-year bond yields
Source: Bloomberg.
Source: Danmarks Nationalbank.
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Ownership of Domestic Securities
Ownership distribution, all securities
Source: Danmarks Nationalbank, August 2014.
Ownership distribution, per segment
Source: Danmarks Nationalbank, August 2014.
• Large and developed investor base
• Access to foreign investors ensures a broad investor base
• Total non-resident ownership share is 42% (end-August)
• T-bills primarily held by non-residents
• 30-year bond primarily held by the pension sector (87%)
• Inflation-linked bond primarily held by non-residents (55%) and pension sector (35%)
0
20
40
60
80
100
120
140
160
180
200
T-bills < 1 year 2-year 5-year 10-year 30-year 10-year
linker
Non-residents Insurance and pension Banks Other
Kr. billion
Insurance and pension
44%
Non-residents42%
Investment
funds7%
Banks
6%
Other
1%
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DGBs highly correlated with German bonds
Correlation with equivalent German bonds, 10-year bonds
Source: Bloomberg.
-1,00
-0,75
-0,50
-0,25
0,00
0,25
0,50
0,75
1,00
DK NL FI AT FR BE ES IT
2012, 1H 2012, 2H 2013, 1H 2013, 2H 2014, 1H 2014, 2H-to-date
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• Purpose: Maintain market access
and adequate foreign exchange
reserves
• Strategy: One loan per year
• Loans may be issued in dollar or euro
• Only net exposure in euro
• All foreign issuance include 144a/RegS
language
• One loan in 2014:
• 3-year USD 1.5bn in March
• This completed 2014 foreign bond funding
• 2014 redemption of EUR 2.8bn
• Total CP outstanding of USD 1bn
• Max. size: USD 12bn in ECP and USCP
• Strategy: limited issuance to be in market
USD issuance March 2014
Source: Danmarks Nationalbank.
Foreign bonds in USD end EUR
Source: Danmarks Nationalbank.
Coupon: 0.875%
Effective yield: 0.902%
Mid-swap: -2 bps.
USD bonds
Bond Size
May 2015 1.75
Apr 2016 1.50
Mar 2017 1.50
Total USD 4.75
EUR bonds
Bond Size
Oct 2015 1.50
Mar 2016 1.25
Total EUR 2.75
Broad Investor Interest in Foreign issuances
Central Banks & Official
Inst. 70%
Asset Managers
17%
Banks 9%
Corpo-rates 5%
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Foreign Issuances in 2013 and 2014
Source: Danmarks Nationalbank.
3y USD issuance March 2014, region
Source: Danmarks Nationalbank.
3y USD issuance April 2013, region
Source: Danmarks Nationalbank.
3y USD issuance April 2013, type
Source: Danmarks Nationalbank.
Central Banks & Official
Inst. 70%
Asset Managers
17%
Banks 9%
Corpo-rates 5%
Central banks & Official
Inst. 75%
Asset Managers
14%
Banks & Other11%
EMEA48%
Americas29%
Asia23%
Americas 26%
Asia 30%
EMEA 44%
3y USD issuance March 2014, type
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Outline
1. Government Finances and
Debt
2. Borrowing Strategy
3. Risk Management
Low Refinancing and Interest-rate Risk
• Low refinancing risk on debt portfolio a key priority:
• Issuance in longer maturity bonds has been high in recent years.
• Government’s account sufficiently large to cover redemptions and interest payments for a year.
• Duration on total portfolio (ALM approach) with fixed discount factor is around 12 years
• Target is 11.5 years ± 1 year
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Source: Danmarks Nationalbank.
Duration of portfolio
Source: Danmarks Nationalbank.
0
25
50
75
100
125
150
175
200
225
250
2006 2007 2008 2009 2010 2011 2012 2013 2014
Domestic bonds T-bills Foreign bondsCommercial Paper Cash reserve
DKK billion
Refinancing requirement & cash reserve
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Low Interest-rate Sensitivity
Pass through to costs of a 100 bp. permanent increase in all yields
Source: Danmarks Nationalbank.
• Combination of low debt, long-term liabilities and considerable short-term assets ensures very gradual pass-through of higher interest rates to costs
• Slow pass through:
• ensures political reaction time in face of adverse shocks
• mitigates risks to sustainability from sudden surges in risk spreads
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T-bills:
• Danske Bank
• Nordea
• Nykredit Bank
• SEB
• Sydbank
Commercial Paper:
Government Bonds:
Regional:
• Danske Bank
• Nordea
• Nykredit Bank
• Skandinaviske Enskilda Banken (SEB)
• Spar Nord Bank
• Sydbank
International:
• Barclays Bank
• BNP Paribas
• Deutsche Bank
• HSBC
• JP Morgan
• Morgan Stanley
ECP• Bank of
America/Merill Lynch
• Barclays
• Credit Suisse
• Citibank
• Deutsche Bank
• ING
• UBS
USCP• Bank of
America/Merill Lynch
• Barclays
• JP Morgan
Further InformationPrimary Dealers
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Foreign bonds (EMTN):
• Programme amount: Up to USD 25bn
• 144a/RegS language included
• Listing: Luxembourg Stock Exchange
• Governed by UK law
• Clearing: Euroclear, Clearstream and DTC
• Forms of Instruments: Bearer or registered
Domestic Bonds:
• Listing: OMX/Nasdaq Copenhagen
• Governed by Danish Law
• Clearing: VP Securities, Euroclear and Clearstream
• Primary Dealers and clearing houses provide custody services
• Standard settlement: t+2 days (as of 6 October 2014)
• Main trading platforms:
• Inter-dealer: MTS Denmark, Eurex Bonds, ICAP/BrokerTec and Nasdaq OMX
• Other: Bloomberg, Bondvision and Tradeweb
Further InformationTerms and Settlement
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Useful links:
• Ministry of Finance:
• www.fm.dk
• Ministry of Economic Affairs and the Interior:
• www.oim.dk
• Statistics Denmark:
• www.dst.dk
• Economic Council:
• www.dors.dk
• MTS Denmark:
• www.mtsdenmark.dk
• NASDAQ OMX:
• www.nasdaqomxnordic.com
Contact information:
• Debt Management Office
• www.governmentdebt.dk
• Head of DMO: Lars Mayland Nielsen
• +45 3363 6102 // [email protected]
• Thorsten Meyer Larsen
• +45 3363 6131 // [email protected]
• Danmarks Nationalbank
• Havnegade 5,1093 Copenhagen K, Denmark
• +45 3363 6363
• www.nationalbanken.dk
Further InformationContact Information and links