hjemmeside, oktober 2014 [kompatibilitetstilstand] · • all foreign issuance include 144a/regs...

DANMARKS

NATIONALBANK

DANISH GOVERNMENT DEBT MANAGEMENT

October 2014

Kingdom of Denmark: AAA, Stable Outlook

• Low government debt

• Current account surplus and net external assets

• Reform-oriented policies

• Strong and transparent institutional framework

• Competitive economy and flexible labour market

2

“Denmark’s considerable fiscal flexibility and strong institutional frameworks are conducive to swift policy responses.” [S&P, October 2014]

“Denmark is a wealthy, high value-added and diverse economy. It’s track record of macro-financial stability is reflected by low and stable inflation, current account surpluses and a stable banking sector…” [Fitch, August 2014]

“Denmark's Institutional Strength is scored at 'very high (+)', reflecting the forward-looking, pro-active policies that successive governments have pursued for many years.” [Moody’s, June 2014]

3

Outline

1. Government Finances and

Debt

2. Borrowing Strategy

3. Risk Management

4

Central-government Debt and Gov. Budget

• Low debt

• Stable debt levels since 2012

• Re-lending – mainly government infrastructure projects – is a large part (20 per cent) of central-government debt

• Low deficits

• Approx. structural balance in 2013

Central-government debt

Source: Danmarks Nationalbank.

Government budget balance

Source: Budget Outlook 2, August 2014

0

5

10

15

20

25

30

35

40

2003 2005 2007 2009 2011 2013

Debt adjusted for re-lending Debt

Per cent of BNP

5

EMU Debt

Sources: Danmarks Nationalbank.

EMU debt less the government’s cash reserve, 2002-13

• The government’s cash reserve (equivalent to 9 per cent of GDP) is not included in the EMU debt figures

0

5

10

15

20

25

30

35

40

45

50

EMU debt EMU debt less government cash reserve

Per cent of GDP

6

Public Gross and Net Debt

Sources: IMF WEO April 2014 & EU Commission Spring 2014 Forecast.

2013 debt levels across selected EU countries

7

Outline


Debt


3. Risk Management

8

Danish Funding Rules

Domestic funding rule

• Issuance in DKK to cover the deficit and redemptions of domestic debt

Foreign funding rule

• Issuance in foreign currency to maintain an adequate foreign-exchange reserve and access to markets

T-bills and bonds

Method: Auctions supplemented with tap

Dollar and euro loans

Method: Syndication

9

Breakdown of Central-Government Debt

Central-government debt, end-2013

Nominal Amount DKK billion Per cent of GDP

Domestic debt 664 36

Foreign debt 76 4

Pledging of collateral for swaps 4 0

Government funds -95 -5

Central-government’s account at Danmarks Nationalbank -162 -9

Central-government debt 487 26

Re-lending -98 -5

Central-government debt adjusted for re-lending 389 21

Note: A positive (negative) figure indicates a liability (an asset). Source: Danmarks Nationalbank.

• Issuance target of DKK 100 bn. (EUR 13bn.)

• Year-to-date a total of DKK 90 bn. has been issued

• Issuances are targeted at longer maturity segments, primarily the 10-year segment

• T-bill programme: DKK 30 billion (EUR 4 bn.)

• Cash reserve 9% of GDP sufficient to cover more than one year’s financing requirement

10

Issuance in 2014


Strategy for 2014Domestic issuance

0

10

20

30

40

50

60

70

80

90

100

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2-year 5-year

10-year 30-year

10-year index-linked Issuance target kr. 100 billion

Kr. billion

Domestic Securities Issuance Method

• Bonds primarily issued at auctions

• Normally two auctions each month with two bonds at each auction

• Dates are announced 3 months in advance. Papers are announced at least 3 work days prior to auctions.

• No forced biddings by banks

• Bidding through 12 Primary Dealers

• T-bills are issued at auctions

• Normally one each month

• No forced biddings by banks

• Bidding through 5 Primary Dealers

• Switch-facility

• Buy-back auctions

11

Bond issuance at auctions


3-month auction calendar

Note: (*) Tentative dates.

Date

8 October

22 October

5 November*

19 November*

10 December*

0

5

10

15

20

25

8 J

an

22

Ja

n5

Fe

b1

9 F

eb

5 M

ar

19

Ma

r9

Ap

r2

3 A

pr

14

Ma

y2

8 M

ay

11

Ju

n2

Ju

l2

0 A

ug

3 S

ep

17

Se

p1

Oct

15

Oct

12

No

v1

0 D

ec

7 J

an

21

Ja

n4

Fe

b1

8 F

eb

4 M

ar

18

Ma

r1

Ap

r1

5 A

pr

6 M

ay

20

Ma

y3

Ju

n1

7 J

un

1 J

ul

19

Au

g2

Se

p1

6 S

ep

8 O

ct

2013 2014

Kr. billion

Bid Sold

12

Strategy for 2014Broad List of On-The-Runs

• Broad list of on-the-run issues

• T-bill programme

• 2-, 5-,10- and 30-year nominal bonds

• 10-year inflation-linked bond

• Inflation-linked bond opened in 2012

• Linked to Danish CPI.

• Other features follow international standards, e.g. deflation floor.

• Current outstanding (October): DKK 35 bn.

• Included in Barclay’s global inflation-linked index.

• New 10-year nominal bond (1,75 per cent 2025) was opened 20 May 2014

• Current outstanding (October): DKK 33bn.

Domestic redemption profile

10-year bond yields

Source: Bloomberg.


13

Ownership of Domestic Securities

Ownership distribution, all securities

Source: Danmarks Nationalbank, August 2014.

Ownership distribution, per segment

Source: Danmarks Nationalbank, August 2014.

• Large and developed investor base

• Access to foreign investors ensures a broad investor base

• Total non-resident ownership share is 42% (end-August)

• T-bills primarily held by non-residents

• 30-year bond primarily held by the pension sector (87%)

• Inflation-linked bond primarily held by non-residents (55%) and pension sector (35%)

0

20

40

60

80

100

120

140

160

180

200

T-bills < 1 year 2-year 5-year 10-year 30-year 10-year

linker

Non-residents Insurance and pension Banks Other

Kr. billion

Insurance and pension

44%

Non-residents42%

Investment

funds7%

Banks

6%

Other

1%

14

DGBs highly correlated with German bonds

Correlation with equivalent German bonds, 10-year bonds

Source: Bloomberg.

-1,00

-0,75

-0,50

-0,25

0,00

0,25

0,50

0,75

1,00

DK NL FI AT FR BE ES IT

2012, 1H 2012, 2H 2013, 1H 2013, 2H 2014, 1H 2014, 2H-to-date

15

• Purpose: Maintain market access

and adequate foreign exchange

reserves

• Strategy: One loan per year

• Loans may be issued in dollar or euro

• Only net exposure in euro

• All foreign issuance include 144a/RegS

language

• One loan in 2014:

• 3-year USD 1.5bn in March

• This completed 2014 foreign bond funding

• 2014 redemption of EUR 2.8bn

• Total CP outstanding of USD 1bn

• Max. size: USD 12bn in ECP and USCP

• Strategy: limited issuance to be in market

USD issuance March 2014


Foreign bonds in USD end EUR


Coupon: 0.875%

Effective yield: 0.902%

Mid-swap: -2 bps.

USD bonds

Bond Size

May 2015 1.75

Apr 2016 1.50

Mar 2017 1.50

Total USD 4.75

EUR bonds

Bond Size

Oct 2015 1.50

Mar 2016 1.25

Total EUR 2.75

Broad Investor Interest in Foreign issuances

Central Banks & Official

Inst. 70%

Asset Managers

17%

Banks 9%

Corpo-rates 5%

16

Foreign Issuances in 2013 and 2014


3y USD issuance March 2014, region


3y USD issuance April 2013, region


3y USD issuance April 2013, type


Central Banks & Official

Inst. 70%

Asset Managers

17%

Banks 9%

Corpo-rates 5%

Central banks & Official

Inst. 75%

Asset Managers

14%

Banks & Other11%

EMEA48%

Americas29%

Asia23%

Americas 26%

Asia 30%

EMEA 44%

3y USD issuance March 2014, type

17

Outline


Debt


3. Risk Management

Low Refinancing and Interest-rate Risk

• Low refinancing risk on debt portfolio a key priority:

• Issuance in longer maturity bonds has been high in recent years.

• Government’s account sufficiently large to cover redemptions and interest payments for a year.

• Duration on total portfolio (ALM approach) with fixed discount factor is around 12 years

• Target is 11.5 years ± 1 year

18


Duration of portfolio


0

25

50

75

100

125

150

175

200

225

250

2006 2007 2008 2009 2010 2011 2012 2013 2014

Domestic bonds T-bills Foreign bondsCommercial Paper Cash reserve

DKK billion

Refinancing requirement & cash reserve

19

Low Interest-rate Sensitivity

Pass through to costs of a 100 bp. permanent increase in all yields


• Combination of low debt, long-term liabilities and considerable short-term assets ensures very gradual pass-through of higher interest rates to costs

• Slow pass through:

• ensures political reaction time in face of adverse shocks

• mitigates risks to sustainability from sudden surges in risk spreads

20

T-bills:

• Danske Bank

• Nordea

• Nykredit Bank

• SEB

• Sydbank

Commercial Paper:

Government Bonds:

Regional:

• Danske Bank

• Nordea

• Nykredit Bank

• Skandinaviske Enskilda Banken (SEB)

• Spar Nord Bank

• Sydbank

International:

• Barclays Bank

• BNP Paribas

• Deutsche Bank

• HSBC

• JP Morgan

• Morgan Stanley

ECP• Bank of

America/Merill Lynch

• Barclays

• Credit Suisse

• Citibank

• Deutsche Bank

• ING

• UBS

USCP• Bank of

America/Merill Lynch

• Barclays

• JP Morgan

Further InformationPrimary Dealers

21

Foreign bonds (EMTN):

• Programme amount: Up to USD 25bn

• 144a/RegS language included

• Listing: Luxembourg Stock Exchange

• Governed by UK law

• Clearing: Euroclear, Clearstream and DTC

• Forms of Instruments: Bearer or registered

Domestic Bonds:

• Listing: OMX/Nasdaq Copenhagen

• Governed by Danish Law

• Clearing: VP Securities, Euroclear and Clearstream

• Primary Dealers and clearing houses provide custody services

• Standard settlement: t+2 days (as of 6 October 2014)

• Main trading platforms:

• Inter-dealer: MTS Denmark, Eurex Bonds, ICAP/BrokerTec and Nasdaq OMX

• Other: Bloomberg, Bondvision and Tradeweb

Further InformationTerms and Settlement

22

Useful links:

• Ministry of Finance:

• www.fm.dk

• Ministry of Economic Affairs and the Interior:

• www.oim.dk

• Statistics Denmark:

• www.dst.dk

• Economic Council:

• www.dors.dk

• MTS Denmark:

• www.mtsdenmark.dk

• NASDAQ OMX:

• www.nasdaqomxnordic.com

Contact information:

• Debt Management Office

• www.governmentdebt.dk

• [email protected]

• Head of DMO: Lars Mayland Nielsen

• +45 3363 6102 // [email protected]

• Thorsten Meyer Larsen

• +45 3363 6131 // [email protected]

• Danmarks Nationalbank

• Havnegade 5,1093 Copenhagen K, Denmark

• +45 3363 6363

• www.nationalbanken.dk

Further InformationContact Information and links

hjemmeside, oktober 2014 [kompatibilitetstilstand] · • all foreign issuance include 144a/regs...

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