Australia |
The AOFM’s usage of short-term financing continues to significantly be higher than pre-2020 levels. |
Austria |
The Republic of Austria mitigates funding risks with its diversity of funding sources and instruments as well as financial flexibility due to its scarcity. We also try to spread issuances over the year in order to minimize concentration risk and diversify interest rate risk. |
Belgium |
We have business continuity plans that are regularly reviewed and updated. In terms of funding there is a close follow-up of fiscal revenue and spending in order to gauge the outcome of overall funding needs. Throughout 2021, because of large funding transactions early in the year (including SURE loans), we have held larger cash positions than usual. |
Canada |
· The Government of Canada employs an open and collaborative approach for its debt management function. Actions such as publishing market notices, which act as information communiques containing operational details, and/or new program announcements, have been effective. Senior government officials have also effectively communicated changes in funding needs and information on programs and operations during public appearances/speeches. This approach has helped to ensure the well-functioning of the Government of Canada markets and favorable conditions for market liquidity in both the primary and secondary Government of Canada securities markets. In addition, new programs and changes to existing programs that have been announced by the Government to support key financial markets to ensure that they continue to function properly have been well received by market participants and primary dealers (PDs). Given the government’s unprecedented borrowing requirements due to COVID-19, Government officials have also communicated directly to PDs in order to reinforce PDs significant role in Government of Canada Debt Distribution Framework (DDF) in helping to manage the huge increase in Government issuance and providing secondary market liquidity to the GoC market. Being open and transparent in the communication strategy with PDs has also been an effective approach to motivating dealers to provide liquidity to the market and to support primary market issuance. The following are three examples of Canada’s transparency in communication with financial market participants: Publication of the quarterly bond schedule prior to the start of each quarter in advance of auctions Publishing details for each operation in a call for tender a week prior to the auction Regular consultations with market participants: The Government of Canada and the Bank of Canada seek the views of government securities distributors, institutional investors, and other interested parties on issues related to how the Government of Canada securities market is performing and views for the design and operations of the domestic debt program. |
Chile |
There is still a strong space in the external market, as well as a capacity of the local market to absorb short-term instruments. When the local appetite reduced, the DMO increased the issuances in the external markets and reduced the tenor of LC issuances (up to 10 years). When the appetite for long maturities reduced, the DMO decided to issue more T- Bills. |
Colombia |
Though manuals and procedures when applicable. |
Costa Rica |
The indicated risks are managed by defining an annual financing plan or strategy, with access to external financing (loans and Eurobonds issuance), in addition by prefunding the Government's cash flow and by adopting spending containment measures. and fiscal rule. |
Czech Republic |
Risks arising from domestic or global financial markets are managed operatively by flexible debt issuance strategy, which is published for following year and updated in the mid-term (quarterly in extraordinary cases). Additionally, the decisions related to gross issuance are discussed and approved by the Ministry of Finance management every quarter. Ministry of Finance also keeps sufficient liquidity buffer within single treasury accounts and forecasts future state debt service expenditure on high percentile. |
Denmark |
Increased government funding demand and increased uncertainty concerning government finances was mitigated by expanding the funding base to foreign issuance, both CPs and EMTN |
Estonia |
In order to mitigate the risk of changes in government’s borrowing needs, a minimum liquidity requirement was introduced and committed credit facilities with the main local partner banks were established already in 2011. The minimum required level of the liquidity position equals the State’s six-month negative net cash flow comprising: transactional requirements, meaning the excess of budgeted monthly outgoings over budgeted revenue (also taking into account entities such as the Health Insurance Fund and the Unemployment Insurance Fund whose cash management is consolidated with central government), including debt and interest payments during the next one-month period, and precautionary requirements, representing an estimate of the deterioration in budgeted tax revenues over the following six months in the event of an economic downturn of the severity experienced in 2009 and a provision for liabilities from guarantees given by the State that are expected to crystallise in the following six months. The actual liquidity position is calculated as (a) the Liquidity Reserve (deposits with maximum three months maturity, current accounts and bonds, liquid and high-grade) plus (b) undrawn amounts from facilities committed for at least the following three months (by banks). These facilities also serve to mitigate operational risks and to ensure that unexpected large outgoing payments can be made without having to liquidate investments. Borrowing strategy document was introduced in 2020 and is updated regularly. |
Finland |
For operational risk process guidelines and checkpoints. There are also contingency and continuity plans. |
France |
Cash buffer and flexibility on the short term funding programme. |
Germany |
Our issuance planning and market entrance allows for adjustments during the year. Short-term changes can, amongst others, be addressed by our bill instruments. |
Greece |
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Hungary |
Flexible issuance plan, contingency plans, communication with market participants, prefinancing. |
Iceland |
Our auction program will have to be adapted to higher funding needs of the government due to consequences of the pandemic. The issuance plan has to be more flexible, more series will be issued and the maximum size of each series has been increased. |
Ireland |
Large cash balance in place, plan issuance schedule around known events |
Israel |
Our funding plans include several scenarios, and for each scenario we carefully built a detailed plan of action and several contingency plans. |
Italy |
The Italian Treasury funding plan is inspired by the principles of transparency and predictability. In order to handle possible risks deriving from a national and international geopolitical scenario, the funding strategy is oriented toward managing interest-rate and refinancing risks, so as to continue to keep exposure to such risks under control. Moreover, the Italian treasury has focused its debt management policy in increasing the average life of the debt to mitigate the risk of refinancing by diluting over time the volumes to place on the market and to decrease the issuer’s exposure to sudden increases in interest rates. However, the above-mentioned factors are characterized by a level of uncertainty which makes difficult to predict their evolution over time. Therefore, the Treasury funding strategy keeps a sufficient degree of flexibility in order to quickly response and adapt its funding plan to the evolution of the market context, as occurred during the Covid-19 crisis. |
Japan |
In the case of rapid changes in fiscal demands, we will adjust the amount of front-loading Refunding Bonds in order to mitigate additional impacts on the JGB market. Also, we will deal with a decline in market liquidity through Liquidity Enhancement Auction, an additional issuance of off-the-run bonds. |
Korea |
Contingency plan |
Latvia |
We use pre-funding approach, maintaining liquidity buffer, to keep flexibility in context of issuance timing, terms and conditions, etc. We regularly review and update the total funding requirement and adjust the borrowing activities if necessary |
Lithuania |
When redeeming major (equivalent to EUR 1 billion and above) Eurobond issues, the risks are mitigated by allocating the required funds in advance. Also we can use the reserve (stabilization) fund for the debt redemptions. The taken amount must be returned to the fund within few years. Thus, we have high cash buffers or liquidity cushions, actively seek to reduce operational risk. |
Luxembourg |
contingency funding plans |
Mexico (local market debt) |
The response to this question is not split into local and external debt. Given that the pandemic remains a latent risk, the Federal Government has a contingency plan and can continue its payment and non-market related operations remotely without the need of daily on-site work. |
Mexico (external market debt) |
The response to this question is not split into local and external debt. Given that the pandemic remains a latent risk, the Federal Government has a contingency plan and can continue its payment and non-market related operations remotely without the need of daily on-site work. |
Netherlands |
Funding plans are drafted with sufficient flexibility to deal with unexpected changes, whilst at the same time maintaining sufficient predictability for investors. Interest rate risk is kept at acceptable levels through targets for the average time to refixing and the 12-month refixing rate of the portfolio. Operational risks are managed through business continuity plans among others. Liquidity risk is mitigated through maintaining a sizeable money market and having the option to store cash at the central bank. |
New Zealand |
Liquidity risk – As a result of our experience during the COVID-19 pandemic we have undertaken work to quantify the size of a larger, enduring liquidity buffer. We maintain a buffer of high quality liquid assets and also have a limited overdraft facility with the Central Bank if there are unforeseen funding needs in the short-term. We also have the option to increase Treasury Bill and ECP issuance in the short-term. COVID-19 pandemic risk – we take a long-term structured approach to our funding strategy, rather than trying to tactically respond to short-term market dynamics. Our intention is to provide as much certainty as possible and thereby reduce the uncertainty or illiquidity premiums that are applied to our bonds. Over the long-term we believe this will place us in the best possible position in the backdrop of global financial risks that are beyond our control. Political risks – we avoid syndications around the timing of elections. We emphasise to investors the continuity of fiscal prudence between parties, and that the strengths of the NZ sovereign rating are independent of a particular political party. Change in Government borrowing needs – we review the borrowing programme forecasts at two scheduled points during the year. Last year we were also able to seek out-of-cycle approval from the Minister of Finance to change the borrowing programme. |
Norway |
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Poland |
Holding a cash buffer, flexibility in terms of issuance: instruments, markets, issuance techniques. Maintaining the relations with investors and developing the investor base. Emergency procedures are updated on a regular basis taking into account new types of security issues. Technical infrastructure allowing for running debt management processes from outside of the Ministry of Finance building is assured. |
Portugal |
When preparing the financing plan for the year, potential risk factors are taken into account, therefore we anticipate as much as we can the financial schedule aiming to comfortably raise the funds to cover not only the year needs but also prefunding at least 30% of the following year gross funding needs and/or execute liability management exercises with the cost of debt reduction and smooth of redemption profile objectives. We also have contingency funding plans – e.g. we can launch new financial instruments directed to local retail market at short notice if need be. |
Slovak Republic |
Sufficient liquidity buffer (currently higher than long-term average). |
Slovenia |
These risks are managed by DMO maintaining the flexibility under the scope of annual funding plan, which in turn enables a swift response when needed. Bonds with short term residual maturity were offered for buy-back in 3Q 2021 in order to decrease refinancing risk in the following two years. |
Spain |
When preparing our yearly funding strategy we take all these risks into account. Therefore, the net funding goal takes possible risk factors into account, providing us with a conservative estimate, given the information available at the time. Moving on to the actual execution of our funding plan, one of the ways we can manage possible risks (especially the high degree of uncertainty associated to the pandemic), is by front-loading our issuance. This was something done by many DMOs, including ourselves. The idea is that by front-loading our issuance, we avoid saturating the market later in the year, if it becomes necessary to increase our funding needs. |
Sweden |
The Debt Office´s strategy to meet a rapidly changing borrowing need is to initially handle with short term funding (adjusting T-bill issuance, CP and bonds in foreign currency) and then gradually adjusting the borrowing in long term funding. It is also important to have different borrowing methods (auction, syndications, private placements) and maintain short-term funding market (T-Bills, repos). |
Switzerland |
The Treasury develops its auction calendar and issuance program in close cooperation with the budgetary units of the Ministry of Finance. In addition, the issuance program is revised on a quarterly basis and, if necessary, adapted according to the funding needs of the government. These updates are also approved by the Asset & Liability committee of the Treasury, on which – among others – the budgetary units and the Swiss National Bank are represented. With this rolling planning, potential risk factors can be taken into account for the issuance program and at each quarterly adaption. Thanks to this process and the relatively large liquidity buffer (see Q11), there is enough time and flexibility to adapt the funding strategy in a timely manner should risks materialize. |
Turkey |
Debt and Risk Management Committee closely monitors and evaluates recent changes in global, local markets and budget realizations and government borrowing needs. With respect to these developments, if needed, the Committee determines new strategies for debt management. Regarding operational risks, we manage our operations according to our Operational Risk and Business Continuity Management frameworks. On the other hand, to manage pandemic related risks while ensuring business continuity; flexible and remote working arrangements had been continued until June 2021. As a result of the high vaccination rate and the decline in the spread of coronavirus, working arrangements in public sector got back to normal as of July 2021. Besides, Turkish Treasury has an emergency and business continuity plan to deal with the operational risks since 2011. The BCP is updated annually and whenever deemed necessary. In that regard, at the beginning of the pandemic, we updated the BCP in 2020 to cover the case of a pandemic, revised the critical roles, the skills needed to fulfil these positions, and replacements/substitutes for key individuals. |
United Kingdom |
In order to try and manage some of these risks (as set out in the table in question 4), the UK DMO has a longstanding predictable approach to debt issuance, providing as much transparency to the market about our supply plans as possible. We aim to provide timely updates on the quarterly issuance calendar following market consultation, and with respect to the timing of syndicated offerings, in particular. This approach has served the DMO and the market well, supporting gilt market functioning and smooth price adjustment. In addition, we regularly consult with the market about current demand conditions before confirming our detailed plans for the period ahead; this gives scope to reflect market feedback (e.g. about shifts in demand conditions) into our issuance programme on a regular basis. With respect to ‘contingency funding’ (for example, the rapid increase in financing required as a result of the COVID-19 pandemic), we scaled up the size of our syndications and increased the frequency and average size of our auctions. We adapted to the changing market conditions by increasing issuance across the curve, including shorter-dated gilts (e.g. 3-year maturity); doing so was an essential component of the programme necessitated as a means to help deliver a rapidly increasing borrowing requirement. With effect from 7 April 2020, we also increased the post auction option facility rate from 15% to 25% with the intention to provide to auction participants a greater incentive to participate in operations. Within cash management, we increased Treasury Bill issuance at certain points in the pandemic. We regularly review our business continuity plan to ensure that it remains fit for purpose, in particular, to mitigate against the risk that we might be unable to hold an operation due to some unforeseen circumstance. |