This report examines net and gross sovereign borrowing in OECD countries from 2007 to 2019. It first looks at net and gross borrowing needs of OECD governments in the context of fiscal developments. It then considers recent trends in central government marketable debt in the OECD area and central government debt ratios for groups of selected OECD countries. Finally, the report examines funding strategies and growing issuance of debt with 30 or more years of maturities. This report is part of the forthcoming 2019 edition of the Sovereign Borrowing Outlook which will be released during the Global Forum on Public Debt Management on 23 April 2019.

Key findings

• Gross borrowings of OECD governments from the markets, which peaked at USD 10.9 trillion in 2010 in the wake of the financial crisis, are set to reach a new record level in 2019 by exceeding USD 11 trillion. While government funding needs in the wake of the financial crisis increased in most OECD countries, the recent further increase is confined to a few countries, particularly the United States.
• In 2017, the new debt issuance of OECD governments to the markets registered the lowest level since 2008, but increased by USD 600 billion to USD 1.9 trillion in 2018 and is projected to exceed USD 2 trillion in 2019.
• Between 2007 and 2018, outstanding central government debt for the OECD area as a whole doubled and the debt-to-GDP ratio rose from 49.5% to 72.6%. While the new debt issuance is set to increase the nominal level of outstanding central government debt further, debt-to-GDP ratio is projected to remain at 72.6% in 2019, mainly owing to continued economic growth in the OECD area.
• Compared with the pre-crisis levels, the interest rate-growth differentials – an important indicator to explain debt-to-GDP developments – in the G7 countries have improved significantly and slowed growth in debt-to-GDP ratios in recent years. Nevertheless, central government marketable debt-to-GDP ratio for the G7 countries is expected to increase and reach its highest level in 2019. Among the G7 countries, the differential is still positive only in Italy, albeit a relative improvement compared to 2007.
• The gradual exit from unconventional monetary policy has important implications for sovereign funding conditions, mainly through changes in borrowing interest rates and the investor base. The impact of higher interest rates on the cost of debt will initially be relatively low in countries where new borrowing needs are limited and the share of fixed-rate debt with long maturity is high. In terms of the investor base, the absence– or reduced support – of central banks as large buyers will lead to increased funding needs from other investors.
• Over the past decade, the composition of government financing in the OECD area has tilted towards long-term fixed rate financing instruments, which has resulted in more resilient debt portfolios. Correspondingly, average-term-to-maturity of outstanding marketable debt has increased considerably in recent years, and reached almost 8 years in 2018, which implies a slower pass-through of changes in market interest rates to government interest costs.
• Against the backdrop of less favourable funding conditions, sovereign debt management offices should maintain a close communication with investors and other policy making authorities, in particular by re-engaging with their traditional investor base, such as pension funds and insurance companies, and putting more emphasis on diversification of the investor base. Benefits can also be obtained from retaining flexibility in their funding programme with contingency funding tools such as liquidity buffers and Treasury Bills.