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OECD Sovereign Borrowing Outlook 2012
OECD Publishing, March 2012, Pages: 88
OECD governments are facing unprecedented challenges in the markets for government securities as a result of continued strong borrowing amid a highly uncertain environment with growing concerns about the pace of recovery, surging borrowing costs, sovereign risk and contagion pressures.
The OECD Sovereign Borrowing Outlook provides estimates for 2011 and projections for 2012. Higher than anticipated gross borrowing needs of OECD governments are expected to reach USD 10.4 trillion in 2011 and USD 10.5 trillion in 2012, including a strong increase in longer-term redemptions in 2012. Against this backdrop government debt ratios are expected to remain at high levels.
Raising large volumes of funds at lowest cost, with acceptable roll-over risk, remains therefore a great challenge for a wide range of governments, with most OECD debt managers continuing to rebalance the profile of debt portfolios by issuing more long-term instruments and moderating bill issuance.
Additional challenges for government (and corporate) issuers are the complications generated by the pressures of a rapid increase in sovereign risk, whereby “the market” suddenly perceives the debt of some sovereigns as “risky”, as well as euro area-induced contagion effects. Growing concerns among investors have resulted in the offloading of significant holdings of European debt.
Preface by Angel Gurría, Secretary-General, OECD
Chapter 1. Sovereign borrowing overview
-1.1. A highly uncertain issuance environment: concerns about the recovery and growing sovereign risk
-1.2. Evolution of budget deficits, sovereign borrowing and debt
-1.3. Summary overview of the borrowing outlook for OECD country groupings
-1.4. The challenge of raising large volumes of funds with acceptable roll-over risk during periods with changes in perceptions of sovereign risk
-1.5. Funding strategy during periods of fiscal dominance and fiscal consolidation
-1.6. Central government debt at a glance
Chapter 2. Outlook for sovereign risk
-2.1. Concerns about sovereign risk outlook is creating major challenges for government borrowing operations
-2.2. Widening of euro area spreads in the summer of 2011
-2.3. Market spotlight on Italy
-2.4. Animal spirits pushing up borrowing rates?
-2.5. Role of credit rating agencies
-2.6. Volatile markets are generating selling pressures and higher borrowing costs
-2.7. Definition and measurement of sovereign risk
-2.8. Mispricing of sovereign risk?
Chapter 3. Impact of financial contagion on borrowing operations within the euro area
-3.1. Potential for contagion of the euro area crisis
-3.2. Direct channels of contagion
-3.3. Indirect channels of contagion and impact on borrowing operations
-3.4. Vulnerability of a monetary union to liquidity crises
Chapter 4. Changes in issuance procedures and techniques
-4.1. The need to adjust issuance procedures and techniques
-4.2. OECD best practices as global standards?
-4.3. Results from a recent survey on OECD issuance procedures and policies
-4.4. Issuance conditions amid a volatile and uncertain environment
-4.5. Responses to tougher issuance condition
Annex A. Principles and trade-offs when making issuance choices in the United Kingdom
Annex B. A suggested new approach to the measurement and reporting of gross short-term borrowing operations by governments
Annex C. Methods and sources
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