DANMARKSNATIONALBANK

DANISH GOVERNMENT DEBT MANAGEMENT

5 July 2016

Kingdom of Denmark: AAA, Stable Outlook

• Low government debt

• Current account surplus and net external assets

• Reform-oriented policies

• Competitive economy and flexible labour market

• Strong and transparent institutional framework

2

“Denmark benefits from high institutional effectiveness, mature political and institutional frameworks that promote fiscal discipline, and a modest government debt burden.” [S&P, March 2016]

“Denmark has a high value-added and wealthy economy, supported by strong institutions with a track record of solid macroeconomic, fiscal and financial stability management.” [Fitch Ratings, February 2016]

“The country’s robust public finance indicators are also supportive of the rating and compare favorably with many AAA-peers.” [Moody’s, November 2015]

3

Outline

• Economic Outlook

• Government Finances and

Debt

• Borrowing Strategy for

2016

Denmark is a Creditor Nation

• Consistent current account surpluses since 1999 and net external assets since 2009

• Well diversified exports across industries and countries

• Main sectors include pharmaceuticals and other manufactured goods including design and high-end products

• Improvement in wage competitiveness

4

Net external assets and current account

Source: Statistics Denmark.

Source: Statistics Denmark.

Exports by region, 2015

0

1

2

4

5

6

8

9

-20

-10

0

10

20

30

40

50

2000 2002 2004 2006 2008 2010 2012 2014

Net external assets Current account balance (right axis)

Per cent of GDP Per cent of GDP

Exchange Rate Peg since 1982

• Fixed exchange regime has been a cornerstone in economic policy since 1982

• The fixed exchange rate is the only monetary policy aim for the Danish central bank

• Euro referendums in 1992 and 2000

• Central rate = 746.038 DKK per 100 EUR with a fluctuation band of ±2.25%

5

Exchange rate

6,0

6,5

7,0

7,5

8,0

8,5

9,0

82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16

Market rate Central rate Fluctuation limits (+/- 2.25 per cent)

Kroner per euro

6

Normalisation of FX Reserves and Government Cash Buffer

• Following large inflows in 2015 the size of FX reserves are now back to more normal levels

• Limited impact from Brexit

• The cash buffer is expected to normalise in 2016

• Kr. 75-100 bn. (equivalent to 4-5 per cent of GDP) is a sufficient liquidity reserve

Fx reserves

Large cash buffer

0

10

20

30

40

Jan-14 Jul-14 Jan-15 Jul-15 Jan-16

Per cent of GDP

7

Outline

• Economic Outlook

• Government Finances and

Debt

• Borrowing Strategy for

2016

8

Strong Public Finances and Low Government Debt

• Central-government budget surplus in 2014 and 2015

• Strong government budget framework

• Limits for structural deficits and expenditure ceilings

• Effective sanctions against budget overruns

• Low central-government debt

• Declining debt since 2012

• Duration on total portfolio (ALM approach) is around 12 years

• Among the lowest EMU-debt in Europe

Central-government net cash balance

Central-government debt

-8

-6

-4

-2

0

2

4

6

2005 2007 2009 2011 2013 2015

Per cent of GDP

Low EMU-debt

9

-50

0

50

100

150

200

De

nm

ark

Sw

ed

en

Fin

lan

d

Ho

lla

nd

Ge

rma

ny

Au

stri

a

UK

Ire

lan

d

Fra

nce

Sp

ain

Be

lgiu

m

Po

rtu

ga

l

Ita

ly

Gre

ece

Gross general government debt end-2015, per cent of GDP

10

Outline

• Economic Outlook

• Government Finances and

Debt

• Borrowing strategy for

2016

11

The Currency Split – 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

T-bills and bullet loans

Method: Auctions supplemented with tap

Dollar and euro loans

Method: Syndication

• Bond issuance target: DKK 65 bn. (EUR 9 bn.)

• Well-known and broad list of bonds:

• 2-, 5-, 10-year nominal bonds

• 30-year bond

• 10-year inflation-linked bond

• Issuance is focused on building up the 2-year and 10-year nominal bond

12

Strategy for 2016Supporting a Liquid Market

Domestic redemption profile

0

20

40

60

80

100

120

140

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 … 2039

Bonds T-bills

DKK billion

Issuance in 2016

0

10

20

30

40

50

60

70

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

2-year 5-year 10-year

30-year 10 year index Issuance target

DKK billion

Domestic Bond and T-bill Issuance

• Funding through auctions supplemented by tap-selling directly in secondary markets

• 3 month auction calendar:

• Domestic bonds (twice a month - 1st and 3rd

Wednesday)

• T-bills (twice a month)

• Switches (twice a month)

• Monthly buy-back auctions

• Active DMO role in the secondary markets

• Tap-selling and buying

• Primary dealers are listed in the appendix

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Bond calendar

Date Auction Type*

12 May Switch operation

18 May Regular

15 May Switch operation

01 June Regular

09 June Switch operation

15 June Regular

22 June Switch operation

T-bill calendar

* Papers are announced Thursday before the auction after consulting PDs

Date Auction Type

11 May T-bill

30 May T-bill

08 June T-bill

29 June T-bill

13 July T-bill

Solid Bid-to-Cover at Auctions

14

0

5

10

15

20

25

30

35

Jan

ua

ry

Fe

bru

ary

Ma

rch

Ap

ril

Ma

y

Jun

e

July

Au

gu

st

Se

pte

mb

er

Octo

be

r

No

ve

mb

er

De

ce

mb

er

Jan

ua

ry

Fe

bru

ary

Ma

rch

Ap

ril

Ma

y

Jun

e

July

Au

gu

st

Se

pte

mb

er

Octo

be

r

No

ve

mb

er

De

ce

mb

er

Jan

ua

ry

Fe

bru

ary

Ma

rch

Ap

ril

Ma

y

Jun

e

2014 2015 2016

Bids Sales

DKK billion

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Ownership of Domestic Bonds

Ownership, per segment

Source: Danmarks Nationalbank, end-April 2016.

Foreign ownership of domestic bonds

Source: Danmarks Nationalbank, end-April 2016.

• Large and developed investor base

• Access to foreign investors ensures a broad investor base

• Total non-resident bond ownership share is 40 per cent (end-April) 0

20

40

60

80

100

0

40

80

120

160

200

< 1 year 2-year 5-year 10-year 30-year 10-yearlinker

Total

Per cent

Non-residents Insurance and pension Banks Other

DKK Billion

10-year Yield Spreads to Germany

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Note: Par yields

Source: Nordea Analytics

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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

• 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

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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

• Main trading platforms:

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

• Other: Bloomberg, Bondvision and Tradeweb

Further InformationTerms and Settlement

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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

• governmentdebt@nationalbanken.dk

• Head of DMO: Lars Mayland Nielsen

• +45 3363 6102 // lmn@nationalbanken.dk

• Senior Adviser: Thorsten M. Larsen

• +45 3363 6131 // tml@nationalbanken.dk

• Danmarks Nationalbank

• Havnegade 5,1093 Copenhagen K, Denmark

• +45 3363 6363

• www.nationalbanken.dk

Further InformationContact Information and links

Annex

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Denmark in Brief

• Part of Scandinavia in Northern Europe

• Population: 5.6 million

• Capital: Copenhagen (1.2 million)

• Land area: 42,895 km2

• Currency: Danish kroner pegged to the euro

• Government: Constitutional monarchy

• Member of the European Union since 1973

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Government Debt Management – Danish DMO

• Located in Danmarks Nationalbank

• Borrows on behalf of Ministry of Finance

• Government debt policy

• Borrowing strategy

• Risk management

• Overall management of government funds, re-lending and government guarantees, etc.

• Investor relations

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