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OECD Sovereign Borrowing Outlook 2017

image of OECD Sovereign Borrowing Outlook 2017

The OECD Sovereign Borrowing Outlook provides regular updates on trends and developments associated with sovereign borrowing requirements, funding strategies, market infrastructure 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 and which distribution channels are being used. This edition provides data, information and background on sovereign borrowing needs and discusses funding strategies and debt management policies for the OECD area and country groupings. In particular, it examines: gross borrowing requirements; net borrowing requirements; central government marketable debt; interactions between fiscal policy, public debt management and monetary policy; funding strategies, procedures and instruments; liquidity in secondary markets; implications of a low interest environment for government debt; and the outlook of inflation linked bonds.

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The outlook for inflation-linked bonds

This chapter provides an overview of inflation-linked sovereign debt which has grown significantly in OECD countries since the early 1980s, with currently USD 3 trillion bonds outstanding. First, it examines the historical trend of sovereign issuance of inflation-linked debt, along with strategic perspectives from investors and policymakers. It then discusses potential implications of changes in market conditions for inflationlinkers, including liquidity premium and potential impacts of relatively lower current break-even inflation rates in several jurisdictions. The principal conclusion of this study is that there is, and will continue to be, an important place for linkers in debt portfolios, as these securities offer advantages for issuers and investors even in a low-yield and lowinflation environment. However, there may be opportunities to innovate at the instrument level to enhance the desirability and liquidity of linkers from the perspective of investors.a

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