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OECD Sovereign Borrowing Outlook 2018

image of OECD Sovereign Borrowing Outlook 2018

The 2018 edition of the OECD Sovereign Borrowing Outlook presents gross borrowing requirements, net borrowing requirements, central government marketable debt and funding strategies for the OECD area and country groupings. In addition, it examines: interactions between fiscal policy; public debt management and monetary policy; procedures and instruments; liquidity in secondary markets; and alternative approaches to sovereign borrowing such as green bonds and GDP-linked instruments in the context of global economic and financial developments.

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A public debt management perspective on liquidity in sovereign bond markets

In recent years market participants in several jurisdictions have become increasingly concerned about government securities markets becoming less liquid over time. Changes in market liquidity may reflect a variety of factors, including: unconventional monetary policies; financial sector adjustments to post-crisis regulations; changes in composition of the investor base, and the proliferation of electronic trading venues and strategies. The secondary market liquidity of government bonds is of utmost importance for sovereign debt managers, as this is an important contributing factor in supporting primary market access and minimising sovereign borrowing costs. Sovereign debt managers regularly monitor and review liquidity in government securities markets, based on a range of quantitative and qualitative data. Debt Management Offices benefit greatly from operationally and informationally efficient markets, and often play a key role in developing and securing well-functioning markets. In case of an illiquidity concern, sovereign debt managers take proactive – and sometimes innovative – steps to address potential risks associated with deteriorating market liquidity. This chapter presents empirical findings on liquidity conditions in selected government markets in recent years and the views of sovereign debt managers on structural changes affecting market liquidity, including measures taken to improve liquidity conditions.

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