OECD sovereign borrowing outlook 2021

• Year: 2021
• Tongue: English
• Leaves: 94
• Series: OECD sovereign borrowing outlook,
• Category: Library

✦ Table of Contents

Foreword
Acknowledgements
Editorial
Abbreviations and acronyms
Executive summary
Government funding needs and debts, which surged dramatically in 2020 as fiscal deficits increased and economies contracted in the wake COVID-19 crisis, will remain high in 2021
Interest rates on government securities have declined to record lows, limiting the debt service burden
Shortened maturities combined with continued large new borrowing needs mean higher rollover ratios and refinancing risk
Prudent debt management will be required as financing needs for debt repayments soar and the outlook for the global economy remains uncertain
1 Sovereign borrowing outlook for OECD countries
1.1. Introduction
1.2. Sovereign borrowing hit a record high in 2020 and is projected to continue rising in 2021
1.3. Key features of sovereign borrowing during the COVID-19 crisis
1.3.1. New debt has been issued at lower costs
1.3.2. Growing number of new maturity lines and new instruments
1.3.3. Heavy reliance on short-term debt issuance
1.3.4. Borrowing operations have been adapted to rapidly changing circumstances
1.4. Sovereign debt ratios reached all-time highs in many countries
1.4.1. Prolonged low interest rates have contained the impact of higher financing needs on government interest expenses
1.4.2. The average maturity of outstanding debt has dropped from the pre-pandemic peaks in most countries
1.5. The outlook calls for a cautious approach to debt management
1.5.1. Rollover ratios as well as auction sizes are rising in many countries
1.5.2. Emergency response capacities
References
Annex 1.A. Methods and sources
Definitions and concepts used in the Sovereign Borrowing Outlook Survey
Coverage of institutions: Central government
Coverage of types of debt: Marketable debt
Terminology
Regional aggregates
Calculations and data sources
Average term to maturity
Notes
2 Revisiting sovereign refinancing risk in light of COVID-19 crisis
2.1. Introduction
2.2. Sovereign refinancing risk
2.2.1. Assessment of sovereign refinancing risk
2.3. Impact of the epidemic on sovereign refinancing needs in the OECD area
2.4. Measuring refinancing risk through key indicators
2.4.1. Key indicators
Average Time to Maturity (ATM)
Rollover Ratio (ROR 1Y)
Rollover Ratio (ROR 3Y)
2.4.2. Limitations of indicators
2.5. Means of managing refinancing risk
2.5.1. Benchmark redemption profile of a theoretical model
2.5.2. Strategic design of funding strategies with refinancing risk considerations
2.5.3. Bond switches and buybacks
2.5.4. Building flexibility in case of market disruption
Liquidity buffer practice:
Diversification in source of funding:
Establishing credit lines:
Access to liquid money markets:
Role of transparency and communication in times of stress:
References
Notes
3 The impact of the COVID-19 crisis on emerging market borrowing
3.1. Introduction
3.2. The pandemic has weighed greatly on emerging market sovereign issuers
3.2.1. Funding conditions have improved, but vulnerability to global risk sentiment remains high
3.2.2. Debt issuance has picked up, though remained lower than historical averages in some regions
Emerging Asia remained the largest regional issuer, while many other regions lagged behind historical averages
Upper-middle-income countries maintained an upward trend despite the pandemic, thanks to accommodative monetary policies
3.3. Currency and maturity structure varied widely among country groups
3.3.1. T-Bill issuance by non-investment grade issuers has increased
3.3.2. The pandemic is spurring the issuance of new instruments
3.3.3. Domestic currency securities continue to dominate EM issuance, while some issuers faced challenges in regaining access to international markets
3.3.4. USD remained the most popular foreign currency of debt issuance
3.4. Increased financing and shorter maturities amplified medium-term refinancing needs
3.4.1. Emerging market issuers should be vigilant amid continued global uncertainty
References
Annex 3.A. Methods and sources
Primary sovereign bond market data and country groupings
Credit ratings data
Notes
Annex A. OECD 2020 Survey on Primary Markets Developments
Annex A is available ONLINE ONLY at the following DOI: https://doi.org/10.1787/48828791-en
List of tables in Annex A
Annex B. OECD 2020 Survey on Liquidity in Government Bond Secondary Markets
Annex B is available ONLINE ONLY at the following DOI: https://doi.org/10.1787/48828791-en
List of tables in Annex B
Annex A. OECD 2020 Survey on Primary Markets Developments
Annex B. OECD 2020 Survey on Liquidity in Government Bond Secondary Markets