OECD Sovereign Borrowing Outlook 2018

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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.


Alternative approaches to sovereign borrowing*

The set of instruments issued by sovereign debt managers has expanded over time. Floating-rate and inflation-linked securities have become part of regular issuance choices over the past few decades in addition to traditional instruments, such as zero coupon and fixed rate bonds over a range of maturity segments. In recent years, alternative approaches to sovereign borrowing, such as green bonds and sukuk, have been increasingly in the spotlight. Debt management offices of some OECD countries have issued these instruments mainly to attract investors with different mandates. Nevertheless, only a few countries adopted them as part of regular issuance programmes. Counter-cyclical instruments, including GDP-linked bonds, have also been widely discussed at a theoretical level and in particular their potential role in providing a countercyclical cushion for governments. This chapter draws on discussions and work undertaken by the Committee on Financial Markets and the Working Party on Debt Management, and focuses on: the main drivers for alternative approaches; key considerations for sovereign issuers; issuers’ experience with green bonds and sukuk; as well as views on new approaches, including GDP-linked bonds. In addition, the growing issuance of ultra-long bonds is elaborated in terms of the driving forces and potential implications for investors and issuers.


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