NORWEGIAN GOVERNMENT DEBT - Norges Bank€¦ · An introduction to the Norwegian economy 3 Sources:...

NORWEGIAN GOVERNMENT DEBT JANUARY 2020

KINGDOM OF NORWAY

2NORGES BANK / GOVERNMENT DEBT MANAGEMENT

An introduction to the Norwegian economy

3

Sources: Statistics Norway and Norges Bank

5.36 mill (Q3 2019)

1 USD = 8,94 NOK (21 Jan. 20)

#1 UN’s HDI-index (2018)

NORGES BANK / GOVERNMENT DEBT MANAGEMENT

GDP per capita in USD

USD 76,528 2018

GDP growth(Mainland Norway)

2.2% 2018

Unemployment rate (registered)

2.2% Dec. 2019

Population growth 0.6% Q3 2019

Core inflation(CPI-ATE)

1.8% Dec. 2019

Current accountsurplus

8.1% of GDP 2018

Key policy rate 1.5% Since Sep. 2019

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Kingdom of Norway – Sovereign ratings

Long-term OutlookMoody’s Aaa StableS&P AAA StableFitch* AAA StableDBRS* AAA StableScope Ratings* AAA Stable

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 4

*Unsolicited rating

A solid fiscal position

0

2 000

4 000

6 000

8 000

10 000

0

2 000

4 000

6 000

8 000

10 000

1996 1999 2002 2005 2008 2011 2014 2017


Market value of the Government Pension Fund Global. Billion NOK. 1996 – 2019 (Q3)

Sources: Ministry of Finance and Norges Bank


Fiscal policy shall be geared towards a gradual and sustainable increase in petroleum revenue spending

Over time, the structural, non-oil budget deficit shall correspond to the real return on the Government Pension Fund Global (GPFG), estimated at 3% (until 2017 estimated at 4%)

This rule should not be applied mechanically, however, and considerable emphasis should be placed on stabilising economic fluctuations

The National Budget for 2020 implies a structural, non-oil deficit equivalent to 2.6% of the value of the GPFG

Fiscal rule

Sources: Norges Bank

Pension Fund Global

Transfer to finance non-oil budget deficit

Non-oil revenues

Expenditures

Statens pensjonsfond utland StatsbudsjettetGovernment Pension

Fund Global (GPFG)

Fiscal rule(spend the real return on the GPFG over time,

estimated at 3%)

Central government budget

Petroleum revenues and return on investments

7

The Petroleum fund mechanism


GOVERNMENT DEBT FRAMEWORK


Government debt management in Norway

The Ministry of Finance is responsible for managing government debt, but has delegated the operational responsibility to Norges Bank

Under the mandate laid down by the Ministry, Norges Bank shall issue government debt in the name of the Ministry of Finance.

Norges Bank shall meet the government’s borrowing requirement and manage government debt outstanding.

Borrow at the lowest possible cost within given risk limits

Maintain a yield curve for government securities with a maturity of up to ten years that can serve as a reference for pricing in the market


Government debt framework

10

Government borrowing in Norway


Finance net lending by state banks and other government lending programmes Cover redemptions of existing debt Ensure sufficient government cash reserves

Primary dealer arrangement 4 primary dealers (Danske Bank, DNB,

Nordea, SEB) Repo facilities Report turnover daily Remuneration

Government debt market 394 billion NOK outstanding (end 2019) Issuance in NOK only Issued a new 10-year bond every year since

2014 Annual strategy and borrowing programme

Norway in a nutshell Flexible inflation target: 2% Currency NOK Key policy rate 1.5% Non-EU, but EEA member Conservative coalition government

The strategy for 2020 in brief

Governemnt Debt Management will

Issue government bonds worth 55bn, an increase of 5bn from 2019;

Issue a new 10-year bond in February through syndication;

Offer to buy back portions of the bond maturing in May 2021;

Issue a new 12-month Treasury bill on each IMM date;

Not enter into new interest rate swaps in 2020


Issuance of government bonds


Issued to the market 2012-2019. Planned for 2020. In billions of NOK

60 62 64

4652 50 50 50

0

10

20

30

40

50

60

70

0

10

20

30

40

50

60

70

2012 2013 2014 2015 2016 2017 2018 2019 2020

55 ≈ USD 6.1

Source: Norges Bank

The borrowing requirement in 2020

Borrowing requirement and financing 2020 Planned borrowing is based on the government’s estimated borrowing requirement in the central government budget for 2020.

Redemption of existing bonds is the main component behind the borrowing requirement. This is the first part of the refinancing of NGB 05/2021.


0

10

20

30

40

50

60

70

Borrowing requirement Financing

Sale ofgovernment

bonds

Redemption ofexisting bonds

Net lending to state banks

Drawing on govern-ment cash account

Otheradjustments

Bond issuance in 2019


In billion NOK

0

10

20

30

40

50

60

0

10

20

30

40

50

60

JAN. FEB. MAR. APR. MAY JUN. JUL. AUG. SEP. OCT. NOV. DEC.

1Y-3Y 4Y-6Y 7Y-9Y 10Y Target


The Kingdom of Norway issued NOK 15 billion (to the market, i.e. excluding the government’s own stock) of a new bond maturing on 6 September 2029. This was the second time that Norway issued a bond in Norwegian kroner via syndication.

The bond attracted an order book in excess of NOK 52 billion (excluding Joint Lead Managers) from more than 55 investors.

Joint bookrunners were Danske Bank, DNB Markets, Nordea and SEB. NGB 09/2029 was priced at MS-28 basis points implying a reoffer yield for

investor of 1.799%. The bond pays an annual coupon of 1.75%. The outstanding amount was increased to NOK 27bn through reopenings

during 2019.

New government bond issued via syndication in February

New government bond issued via syndication in Feb. 2019

16

Allocation by investor typeAllocation by region


Source: Norges Bank

Maturity profile of government bonds


Principal. In billions of NOK. Mid January 2020

Source: Norges Bank

88

75

56

35 36 39 3731

0102030405060708090100

0102030405060708090

100

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

OVERVIEW OF THENGB MARKET


10-year yields in selected countries

-1

0

1

2

3

4

-1

0

1

2

3

4

Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20

US UK Norway Sweden Germany


Percent. 2 Jan. 2017 – 21 Jan. 2020

Sources: Norges Bank and Thomson Reuters

Government bonds and T-bills outstanding

20

Outstanding volume As a percentage of GDP. 2012 – 2019 (Q3)

By end of 2012- January 2020 In billions of NOK


197 16284 86 76 74 66 58 60

274289

344 338 383 390 400 394 397

471 451428 424

459 464 466 452 457

0

100

200

300

400

500

600

0

100

200

300

400

500

600

2012 2014 2016 2018 2020

Treasury bills Government bonds

0

5

10

15

20

25

0

5

10

15

20

25

2012 2014 2016 2018

Bonds and T-bills Bonds

Sources: Statistics Norway and and Norges Bank Source: Norges Bank

Foreign and domestic ownership of government bonds


In billions of NOK and as a percentage of total outstanding volume. 2 Jan 2012 – 20 January 2020

Source: VPS (Norwegian Central Securities Depository)

0102030405060708090100

050

100150200250300350400450500

2012 2013 2014 2015 2016 2017 2018 2019 2020

Foreign sector (l.h.s) Domestic sector (l.h.s) Foreign sector (%) (r.h.s)

Ownership shares for government bonds

22

Allocation in auctionsBy region in 2019. Per cent

Ownership shares by investor groupPer cent. 2013 – 2020 (Jan.)


62% 60% 63% 61% 60% 61%73% 75%

9% 12% 12% 14% 16% 19%9% 8%10% 10% 6% 5% 5% 4% 3% 3%

17% 15% 16% 17% 17% 12% 10% 10%

0%

20%

40%

60%

80%

100%

2013 2014 2015 2016 2017 2018 2019 2020Foreign sector BanksLife inur. and pension funds Government sectorFund managers Other

Source: VPS

61 %

2 %

37 %

0 %

Norway

Europe

Americas

Asia

Source: Norges Bank

Liquidity in the government bond market

23

Government bond auctions Bid-to-cover. 2013 – 2019

Turnover Norwegian government bonds Trades reported to OSE until 2017. Transactions

reported by PDs for 2018/19. 2013 –2019


2,22,8 2,6

2,22,5

2,9 2,8

0

1

2

3

4

5

6

7

0

1

2

3

4

5

6

7

2013 2014 2015 2016 2017 2018 2019

Average 2013 - 2018

Sources: Oslo Stock Exchange and Norges Bank

0

50

100

150

200

250

300

350

0

50

100

150

200

250

300

350

2013 2014 2015 2016 2017 2018 2019

Turnover NOK bn

Source: Norges Bank

TREASURY BILLS



Uniform price auctions Listed on Oslo Børs (Oslo Stock

Exchange) Primary dealer arrangement Four outstanding bills at any

given time A new 12-month zero coupon

bill issued on every IMM date Reopenings

Framework In 2020

Maintain volume outstanding in the market of between NOK 31bn and NOK 44bn

20 auctions

Management of Treasury bills

Ownership shares by investor group in Treasury bills

21% 17% 12% 11% 11% 11%28% 29%

40%26% 29%

19% 23% 21%

26% 21%

20%

22% 22%26% 26%

19%

17% 16%

13%27% 27% 38% 34%

43%24% 28%

1% 7% 9% 6% 3% 2% 2% 2%

0%

20%

40%

60%

80%

100%

0%

20%

40%

60%

80%

100%

2013 2014 2015 2016 2017 2018 2019 2020Foreign sector Banks Life inur. and pension funds Government sector Fund managers Other


End of year. 2013 – 2020 (20 Jan.)

Source: VPS


Mandate

Terms and conditions

Sales methods

Auction results

Invitations to tender

Annual borrowing programme

Auction calendar

Quarterly report

Quarterly borrowing volume (range)

Analyses

Key indicators (quarterly)

Daily and monthly data on yields

GE

NE

RA

L IN

FOR

MA

TIO

N

PU

BLI

CA

TIO

NS

STA

TIS

TIC

S

www.debtnorway.no


Contact information

Government Debt Management

www.debtnorway.no Email:

[email protected] Head of Government Debt

Management: Mr Anders Svor +47 223 160 65

Useful links

Norges Bank– www.norges-bank.no

Ministry of Finance– www.finansdepartementet.no

Oslo Stock Exchange– www.ose.no

NewsWeb– www.newsweb.no

Statistics Norway– www.ssb.no

Contact information and links

http://www.debtnorway.no/

http://www.norges-bank.no/

http://www.regjeringen.no/

http://www.ose.no/

http://www.newsweb.no/

http://www.ssb.no/

APPENDIX


Average time to refixing


Years. 1 January 2015 – 20 January 2020

Source: Norges Bank

0

1

2

3

4

5

0

1

2

3

4

5

2015 2016 2017 2018 2019 2020

Debt excluding swaps

Interest rate swaps

Issuance volume of new 10-year bond


Cumulative. In billions of NOK. Q1 2015 – Q4 2019

Source: Norges Bank

1015 18

25

1322 26 29

13 1621

26

0

1823 27

21 25 276

1518

21

6

1215

23

6

15

18

24

11

15

17

23

11

1717

23

0

10

20

30

40

50

60

70

0

10

20

30

40

50

60

70

Q12015

Q2 Q3 Q4 Q12016

Q2 Q3 Q4 Q12017

Q2 Q3 Q4 Q12018

Q2 Q3 Q4 Q12019

Q2 Q3 Q4

New 10-year bond Other bonds

Turnover in the secondary market by region


Government bonds. 2015 – 2019

Sources: Primary dealers and Norges Bank

24%

57%

9% 10%

26%

49%

12% 13%

19%

54%

12%15%

24%

53%

15%

9%20%

56%

14%10%

0%

10%

20%

30%

40%

50%

60%

70%

0%

10%

20%

30%

40%

50%

60%

70%

Norway Europe Americas Asia

2015 2016 2017 2018 2019

Turnover in the secondary market by counterparty


Government bonds. 2015 – 2019

Sources: Primary dealers and Norges Bank

25%

32%

18% 19%

6% 1%

21%

36%

16%

21%

5% 1%

17%

41%

12%

19%

3%7%

26%

32%

10%

21%

2%

9%

0%

10%

20%

30%

40%

50%

0%

10%

20%

30%

40%

50%

Banks/Mortg.comp.

Funds incl.hedge funds

Interdealerbroker

Publicauthorities

Pension,insurance

Other

2016 2017 2018 2019

The presentation material has been prepared by Norges Bank and is updated on a regular basis. All rights reserved.

This document is for information purposes only. Nothing in this presentation material shall be regarded as constituting, orforming part of, an offer or invitation to underwrite, subscribe for or otherwise acquire or dispose of Norwegian government debt.It is provided for information purposes only and is not intended to serve as the basis for any credit or other third party evaluationof that debt. While Norges Bank applies its best efforts to include accurate information and the information herein is believed tobe reliable, Norges Bank makes no representation or warranty as to the accuracy or completeness of such information.

Distribution of information contained in this presentation material may be prohibited or restricted by the legislation of somejurisdictions.

The information contained in this presentation does not constitute an offer for sale in the United States of America or in anyjurisdiction in which such an offer would be unlawful. Norges Bank has not taken any action that would permit an offering of thesecurities described herein to occur outside of Norway. The securities described herein have not been, and will not be,registered under the US Securities Act of 1933, as amended, or with any securities regulatory authority of any state or otherjurisdiction in the United States of America and may not be offered or sold, directly or indirectly, in the United States of Americaunless the securities are so registered or an exemption from the registration requirement has been granted. Each person isrequired to inform himself accordingly, to observe and to comply with applicable restrictions. Norges Bank is by no means liablefor any infringement of such restrictions. Furthermore, the restrictions and limitations listed and described herein are notexhaustive, and other restrictions and limitations in relation to Norwegian government debt that are not known to, or identified by,Norges Bank may apply in various jurisdictions as they relate to this Investor Presentation.

This Investor Presentation shall be governed by, and construed in accordance with, Norwegian law. The courts of Norway, withOslo District Court as legal venue, shall have exclusive jurisdiction in settling any dispute which may arise out of, or inconnection with, this Investor Presentation.


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NORWEGIAN GOVERNMENT DEBT JANUARY 2020

NORWEGIAN GOVERNMENT DEBT - Norges Bank€¦ · An introduction to the Norwegian economy 3 Sources:...

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