OECD Sovereign Borrowing Outlook 2013

image of OECD Sovereign Borrowing Outlook 2013

Each year, the OECD circulates a survey on the borrowing needs of member countries. The responses are incorporated in the OECD Sovereign Borrowing Outlook to provide regular updates of trends and developments associated with sovereign borrowing requirements and debt levels from the perspective of public debt managers. The Outlook makes a policy distinction between funding strategy and borrowing requirements. The central government marketable gross borrowing needs, or requirements, are calculated on the basis of budget deficits and redemptions. The funding strategy entails decisions on how borrowing needs are going to be financed using different instruments (e.g. long-term, short-term, nominal, indexed, etc.) and distribution channels.

Accordingly, the OECD Sovereign Borrowing Outlook provides data and information on borrowing needs and funding policies for the OECD area and country groupings, including gross borrowing requirements, net borrowing requirements, central government marketable debt, funding strategies and instruments and distribution channels.



Challenges in primary markets

Issuance conditions vary among countries. For one group of issuers, the challenge was how to deal with (ultra-)high yields, lower bid-to-cover ratios and greater auction tails reflecting relatively unsuccessful auctions. The second group experienced very strong (flight-to-safety) demand at auctions resulting in negative yields. A third group has no full market access, although different degrees of access can be distinguished when returning to markets. A fourth group had more or less unchanged issuance conditions. The first part of the chapter provides an overview of changes made in issuance procedures and techniques, against the backdrop of changing trends in the composition of the investor base. In response to a more challenging issuance environment, many debt management offices adjusted their issuance procedures (such as more flexible auction calendars, increasing the size of non-competitive subscriptions and greater reliance on syndications) and introduced new types of instruments (like linkers and floaters). Moreover, with the greater role of central banks (foreign and domestic) in government bond markets, maintaining a diversified investor base has become more difficult than before. The second part of the chapter analyses how a more challenging issuance environment has affected both primary dealer systems and the ability of debt managers to distribute their debt to end-investors. This analysis is informed by responses to a survey on the Functioning and Future of Primary Dealer Systems among OECD debt managers. The survey highlights that issuers have introduced wide range of measures to manage the stresses in their markets.



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