NORWEGIAN GOVERNMENT DEBT · Ownership shares for government bonds 27 Allocation in auctions By region so in 2020 H1. Per cent Ownership shares by investor group Per cent. 2013

NORWEGIAN GOVERNMENT DEBT

JUNE 2020

KINGDOM OF NORWAY

2NORGES BANK / GOVERNMENT DEBT MANAGEMENT

An introduction to the Norwegian economy

3

Source: Norges Bank. Monetary Policy Report 2/2020

5.37 mill (Q1 2020)

1 USD = 9.7075 NOK (26 Jun. 20)

#1 UN’s HDI (2019)

NORGES BANK / GOVERNMENT DEBT MANAGEMENT

Projections 2020 2021

GDP growth

(Mainland Norway)

-3.5% 3.7%

Household

consumption growth

-5.2% 6.3%

Unemployment rate

(registered)

5.0% 3.2%

Annual wage growth 1.9% 2.0%

Core inflation

(CPI-ATE)

3.0% 2.6%

Key policy rate (end

of year)

0% 0%

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Kingdom of Norway – Sovereign ratings

Long-term Outlook

Moody’s Aaa Stable

S&P AAA Stable

Fitch* AAA Stable

DBRS* AAA Stable

Scope Ratings* AAA Stable

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 4

*Unsolicited rating

A solid fiscal position

0

2 000

4 000

6 000

8 000

10 000

12 000

0

2 000

4 000

6 000

8 000

10 000

12 000

1996 1999 2002 2005 2008 2011 2014 2017


Market value of the Government Pension Fund Global. Billion NOK. 1996 – 2019

Sources: Ministry of Finance and Norges Bank


Fiscal policy shall be geared towards a gradual and sustainable

increase in petroleum revenue spending

Over time, the structural, non-oil budget deficit shall correspond to the

real return on the Government Pension Fund Global (GPFG), estimated

at 3% (until 2017 estimated at 4%)

This rule should not be applied mechanically, however, and considerable

emphasis should be placed on stabilising economic fluctuations

The revised National Budget for 2020 implies a structural, non-oil deficit

equivalent to 4.2% of the value of the GPFG

Fiscal rule

Source: Norges Bank

Pension Fund Global

Transfer to finance

non-oil budget deficit

Non-oil revenues

Expenditures

Statens pensjonsfond

utland StatsbudsjettetGovernment Pension

Fund Global (GPFG)

Fiscal rule(spend the real return on the GPFG over time,

estimated at 3%)

Central government

budget

Petroleum revenues and

return on investments

7

The Petroleum fund mechanism


GOVERNMENT DEBT FRAMEWORK


Government debt management in Norway

The Ministry of Finance is responsible for managing government debt, but has

delegated the operational responsibility to Norges Bank

Under the mandate laid down by the Ministry, Norges Bank shall issue

government debt in the name of the Ministry of Finance

Norges Bank shall meet the government’s borrowing requirement and manage

government debt outstanding

Borrow at the lowest possible cost within given risk limits

Maintain a yield curve for government securities with a maturity of up to ten

years that can serve as a reference for pricing in the market


Government debt framework

10

Government borrowing in Norway


Finance net lending by state banks and other

government lending programmes

Cover redemptions of existing debt

Ensure sufficient government cash reserves

Primary dealer arrangement

4 primary dealers (Danske Bank, DNB,

Nordea, SEB)

Repo facilities

Report turnover daily

Remuneration

Government bond market

457 billion NOK outstanding (29 June 2020)

Issuance in NOK only

Issued a new 10-year bond every year since 2014

Annual borrowing programme with auction

calendar

Norway in a nutshell

Flexible inflation target: 2%

Currency NOK

Key policy rate 0%

Non-EU, but EEA member

Conservative coalition government

Issuance of government bonds


Issued to the market 2012 to H1 2020. In billions of NOK

6062

64

46

5250 50 50 57

0

10

20

30

40

50

60

70

0

10

20

30

40

50

60

70

2012 2013 2014 2015 2016 2017 2018 2019 2020 H1Source: Norges Bank

The original borrowing requirement in 2020As of 18 Dec. 2019

Borrowing requirement and financing 2020 Planned borrowing is based on the

government’s estimated borrowing

requirement in the central government

budget for 2020

Redemption of existing bonds is the

main component behind the

borrowing requirement. This is the first

part of the refinancing of NGB

05/2021


0

10

20

30

40

50

60

70

Borrowing requirement Financing

Sale ofgovernment

bonds

Redemption ofexisting bonds

Net lending to state banks

Drawing on govern-ment cash account

Otheradjustments

The original strategy for 2020 in brief

Government Debt Management will

Issue government bonds worth 55bn, an increase of 5bn from 2019;

Issue a new 10-year bond in February through syndication;

Offer to buy back portions of the bond maturing in May 2021;

Not enter into new interest rate swaps in 2020


As of 18 Dec. 2019

Updated borrowing requirement for 2020As of 29 June 2020

Revised borrowing requirement and financing 2020 The Government’s economic

measures to address the coronavirus

outbreak are increasing the

government’s borrowing requirement.

The Government Bond Fund (GBF)

has been re-established with a limit of

up to NOK 50bn

The extra financing will depend on the

degree the GBF is used.


0

20

40

60

80

100

120

Borrowing requirement Financing

Sale ofgovernment

bonds

Maturity of bonddebt outstanding

Net lending to state banks

Drawing on govern-ment cash account

Otheradjustments

GovernmentBond Fund

(GBF)

Combination ofbonds, bills and cash account to

finance GBF

Updated strategy for 2020 in brief

The higher borrowing requirement will be met by a gradual increase in the

issuance of both government bonds and Treasury bills. In addition, some of the

borrowing requirement can be met periodically by drawing on the government’s

account with Norges Bank

In the current situation, there is uncertainty about the actual borrowing

requirement

Planned borrowing of government bonds between NOK 70bn and NOK 75bn in

2020, up from the original NOK 55bn


As of 29 June 2020

Bond issuance so far in 2020 (end Q2)


In billion NOK

3 36 6 8 88

133 3 35

52022 26

3636

70

75

55

0

10

20

30

40

50

60

70

80

90

0

10

20

30

40

50

60

70

80

90

JAN. FEB. MAR. APR. MAY JUN. JUL. AUG. SEP. OCT. NOV. DEC.

1Y-3Y 4Y-6Y

7Y-9Y 10Y

New target - lower bound New target - higher bound

Original target Target

Maturity profile of government bonds


Principal. In billions of NOK. By 26 June 2020

Source: Norges Bank

88

78

58

4336

39 37 38 40

0

10

20

30

40

50

60

70

80

90

100

0

10

20

30

40

50

60

70

80

90

100

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

SYNDICATIONS IN 2020



The Kingdom of Norway issued NOK 20 billion (to the market, i.e. excluding

the government’s own stock) of a new bond maturing on 19 August 2030.

This was the third time that Norway issued a bond in Norwegian kroner via

syndication

The bond attracted an order book in excess of NOK 65 billion (excluding Joint

Lead Managers) from more than 55 investors

Joint bookrunners were Danske Bank, DNB Markets, Nordea and SEB

NGB 08/2030 was priced at MS-33 basis points implying a reoffer yield for

investor of 1.485%. The bond pays an annual coupon of 1.375%

New 10 year government bond issued in February 2020

New 10 year government bond issued in February 2020

20

Allocation by investor typeAllocation by region


Source: Norges Bank


The Kingdom of Norway syndicated a tap of the government bond maturing

on 19 August 2030.

The bond attracted an order book in excess of NOK 37 billion (excluding Joint

Lead Managers), of which NOK 10 billion was allocated

Joint bookrunners were Danske Bank, DNB Markets, Nordea and SEB

The tap of NGB 08/2030 was priced at MS-23 basis points implying a reoffer

yield for investor of 0.554% at issuance.

Tap issue of 10 year government bond in May 2020

Tap issue of 10 year government bond in May 2020

22

Allocation by investor typeAllocation by region


Source: Norges Bank

OVERVIEW OF THE

NGB MARKET


10-year yields in selected countries

-1

0

1

2

3

4

-1

0

1

2

3

4

Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20

US UK Norway Sweden Germany


Percent. 2 Jan. 2017 – 26 Jun. 2020

Sources: Norges Bank and Thomson Reuters

Government bonds and T-bills outstanding

25

Outstanding volume As a percentage of GDP. 2012 – Q1 2020

By end of 2012 – end of Q2 2020

In billions of NOK


197162

84 86 76 74 66 58 63

274289

344 338 383 390 400 394

457

471451

428 424459 464 466 452 520

0

100

200

300

400

500

600

0

100

200

300

400

500

600

2012 2014 2016 2018 2020

Treasury bills Government bonds

0

5

10

15

20

25

0

5

10

15

20

25

2012 2014 2016 2018 2020

Bonds and T-bills Bonds

Sources: Statistics Norway and and Norges Bank Source: Norges Bank

Foreign and domestic ownership of government bonds


In billions of NOK and as a percentage of total outstanding volume.

2 Jan. 2012 – 26 Jun. 2020

Source: VPS (Norwegian Central Securities Depository)

0

10

20

30

40

50

60

70

80

90

100

0

50

100

150

200

250

300

350

400

450

500

2012 2013 2014 2015 2016 2017 2018 2019 2020

Foreign sector (l.h.s) Domestic sector (l.h.s) Foreign sector (%) (r.h.s)

Ownership shares for government bonds

27

Allocation in auctionsBy region so in 2020 H1. Per cent

Ownership shares by investor groupPer cent. 2013 – 2020 (26 June)


62 % 60 % 63 % 61 % 60 % 61 %73 %

67 %

9 % 12 %12 % 14 % 16 %

19 %

9 % 16 %10 % 10 % 6 % 5 % 5 %4 % 3 % 5 %

17 % 15 % 16 % 17 % 17 % 12 % 10 % 11 %

0 %

20 %

40 %

60 %

80 %

100 %

2013 2014 2015 2016 2017 2018 2019 2020Foreign sector BanksLife insur. and pension funds Government sectorFund managers Other

Source: VPS Source: Norges Bank

66 %

13 %

21 %

0 %

Norway Europe Americas Asia

Liquidity in the government bond market

28

Government bond auctions Bid-to-cover. 2013 – 2020 (June)

Turnover Norwegian government bonds Trades reported to OSE until 2017. Transactions

reported by PDs for 2018-19. 2013 –2020 (26 June)


2,2

2,8 2,6

2,2

2,5

2,9 2,8 2,6

0

1

2

3

4

5

6

7

0

1

2

3

4

5

6

7

2013 2014 2015 2016 2017 2018 2019 2020

Average 2013 - 2019

Sources: Oslo Stock Exchange and Norges Bank

0

50

100

150

200

250

300

350

0

50

100

150

200

250

300

350

2013 2014 2015 2016 2017 2018 2019 2020

Turnover NOK bn

Source: Norges Bank

TREASURY BILLS



Uniform price auctions

Listed on Oslo Børs (Oslo Stock

Exchange)

Primary dealer arrangement

Four outstanding bills at any given

time

A new 12-month zero coupon bill

issued on every IMM date

Reopenings of existing bonds

between IMM dates

Framework Strategy for 2020

Issue between 2 and 4 billion

NOK in each auction

23 auctions

Ad hoc auctions will be

considered in special

circumstances

Management of Treasury bills

Ownership shares by investor group in Treasury bills

21 % 17 % 12 % 11 % 11 % 11 %

28 % 33 %

40 %

26 %29 %

19 % 23 % 21 %

26 % 18 %

20 %

22 % 22 %

26 %26 %

19 %

17 %15 %

13 %

27 % 27 % 38 % 34 %43 %

24 %27 %

1 % 7 % 9 % 6 % 3 % 2 % 2 % 2 %

0%

20%

40%

60%

80%

100%

0 %

20 %

40 %

60 %

80 %

100 %

2013 2014 2015 2016 2017 2018 2019 2020

Foreign sector Banks Life insur. and pension funds Government sector Fund managers Other


End of year. 2013 – 2020 (26 June)

Source: VPS


Mandate

Terms and conditions

Sales methods

Auction results

Invitations to tender

Annual borrowing programme

Auction calendar

Quarterly report

Quarterly borrowing volume (range)

Analyses

Key indicators (quarterly)

Daily and monthly data on yields

GE

NE

RA

L I

NF

OR

MA

TIO

N

PU

BL

ICA

TIO

NS

STA

TIS

TIC

S

www.debtnorway.no


Contact information

Government Debt Management

www.debtnorway.no

Email:

[email protected]

Useful links

Norges Bank

– www.norges-bank.no

Ministry of Finance

– www.finansdepartementet.no

Oslo Stock Exchange

– www.ose.no

NewsWeb

– www.newsweb.no

Statistics Norway

– www.ssb.no

Contact information and links

http://www.debtnorway.no/

http://www.norges-bank.no/

http://www.regjeringen.no/

http://www.ose.no/

http://www.newsweb.no/

http://www.ssb.no/

APPENDIX


Average time to refixing


Years. 1 January 2015 – 26 June 2020

Source: Norges Bank

0

1

2

3

4

5

0

1

2

3

4

5

2015 2016 2017 2018 2019 2020

Debt excluding swaps

Interest rate swaps

Debt including swaps

Issuance volume of new 10-year bond


Cumulative. In billions of NOK. Q1 2015 – Q2 2020

Source: Norges Bank

1015

1825

13

2226

29

1316

2126

1823

27

1821

25 2722

36

6

15

18

21

6

12

15

23

6

15

18

24

11

15

17

23

11

17

17

23

11

21

0

10

20

30

40

50

60

70

0

10

20

30

40

50

60

70

Q12015

Q2 Q3 Q4 Q12016

Q2 Q3 Q4 Q12017

Q2 Q3 Q4 Q12018

Q2 Q3 Q4 Q12019

Q2 Q3 Q4 Q12020

Q2

New 10-year bond Other bonds

Turnover in the secondary market by region


Government bonds. 2016 – 2020 (26 Jun)

Sources: Primary dealers and Norges Bank

26%

49%

12% 13%

19%

54%

12%15%

24%

53%

15%

9%

20%

56%

14%10%

21%

60%

13%

5% 0%

10%

20%

30%

40%

50%

60%

70%

0%

10%

20%

30%

40%

50%

60%

70%

Norway Europe Americas Asia

2016 2017 2018 2019 2020

Turnover in the secondary market by counterparty


Government bonds. 2016 – 2020 (26 June)

Sources: Primary dealers and Norges Bank

25%

32%

18%19%

6%1%

21%

36%

16%

21%

5% 1%

17%

41%

12%

19%

3%

7%

26%

32%

10%

21%

2%

9%

29% 28%

6%

25%

2%

9%

0%

10%

20%

30%

40%

50%

0%

10%

20%

30%

40%

50%

Banks/Mortg.comp.

Funds incl.hedge funds

Interdealerbroker

Publicauthorities

Pension,insurance

Other

2016 2017 2018 2019 2020

The presentation material has been prepared by Norges Bank and is updated on a regular basis. All rights reserved.

This document is for information purposes only. Nothing in this presentation material shall be regarded as constituting, orforming part of, an offer or invitation to underwrite, subscribe for or otherwise acquire or dispose of Norwegian government debt.It is provided for information purposes only and is not intended to serve as the basis for any credit or other third party evaluationof that debt. While Norges Bank applies its best efforts to include accurate information and the information herein is believed tobe reliable, Norges Bank makes no representation or warranty as to the accuracy or completeness of such information.

Distribution of information contained in this presentation material may be prohibited or restricted by the legislation of somejurisdictions.

The information contained in this presentation does not constitute an offer for sale in the United States of America or in anyjurisdiction in which such an offer would be unlawful. Norges Bank has not taken any action that would permit an offering of thesecurities described herein to occur outside of Norway. The securities described herein have not been, and will not be,registered under the US Securities Act of 1933, as amended, or with any securities regulatory authority of any state or otherjurisdiction in the United States of America and may not be offered or sold, directly or indirectly, in the United States of Americaunless the securities are so registered or an exemption from the registration requirement has been granted. Each person isrequired to inform himself accordingly, to observe and to comply with applicable restrictions. Norges Bank is by no means liablefor any infringement of such restrictions. Furthermore, the restrictions and limitations listed and described herein are notexhaustive, and other restrictions and limitations in relation to Norwegian government debt that are not known to, or identified by,Norges Bank may apply in various jurisdictions as they relate to this Investor Presentation.

This Investor Presentation shall be governed by, and construed in accordance with, Norwegian law. The courts of Norway, withOslo District Court as legal venue, shall have exclusive jurisdiction in settling any dispute which may arise out of, or inconnection with, this Investor Presentation.


Disclaimer

NORWEGIAN GOVERNMENT DEBT

JUNE 2020

Documents

NORWEGIAN GOVERNMENT DEBT · Ownership shares for government bonds 27 Allocation in auctions By region so in 2020 H1. Per cent Ownership shares by investor group Per cent. 2013