NORWEGIAN GOVERNMENT DEBT

JUNE 2021 KINGDOM OF

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 2 An introduction to the Norwegian economy

2020 Projections 2021 GDP growth -3.1% 3.8% (Mainland Norway) Household -7.3% 3.2% consumption growth Unemployment rate 5.0% 3.3% (registered) Annual wage growth 3.1% 2.8% 5.40 mill (Q1 2021)

Core inflation 3.0% 1.7% 1 USD = 8.3477 NOK (16 Jun. 21) (CPI-ATE)

Key policy rate 0% 0,28% #1 UN’s HDI (2019) (average for Q4)

Source: Norges Bank Report 2/2021

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 3 – Sovereign ratings

Long-term Outlook Moody’s Aaa Stable S&P AAA Stable Fitch* AAA Stable DBRS* AAA Stable Scope Ratings* AAA Stable

*Unsolicited rating

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 4 A solid fiscal position Market value of the Government Pension Fund Global. Billion NOK. 1996 – 2020 12 000 12 000

10 000 10 000

8 000 8 000

6 000 6 000

4 000 4 000

2 000 2 000

0 0 1996 1999 2002 2005 2008 2011 2014 2017 2020

Source: Norges Bank Investment Management NORGES BANK / GOVERNMENT DEBT MANAGEMENT 5 Fiscal rule

. 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

. In the revised National Budget for 2021, the structural, non-oil deficit is estimated to be 3.7% of the value of the GPFG in 2021

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 6 The Petroleum fund mechanism Petroleum revenues and return on investments Non-oil revenues

Transfer to finance GovernmentStatens pensjonsfond Pension non-oil budget deficit Central government Pension Fund Global Statsbudsjettet Fund Globalutland (GPFG) budget

Fiscal rule (spend the real return on the GPFG over time, estimated at 3%) Expenditures

Source: Norges Bank NORGES BANK / GOVERNMENT DEBT MANAGEMENT 7 GOVERNMENT DEBT FRAMEWORK

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 8 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

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 9 Government debt framework

Government borrowing in Norway Government bond market . Finance net lending by state banks and other . 447 billion NOK outstanding (16 Jun. 2021) government lending programmes . Issuance in NOK only . Cover redemptions of existing debt . Issued a new 10-year bond every year since 2014 . Ensure sufficient government cash reserves . Annual borrowing programme with auction calendar

Primary dealer arrangement Norway in a nutshell . 4 primary dealers (Danske Bank, DNB, . Flexible inflation target: 2% Nordea, SEB) . Currency NOK . Repo facilities . Key policy rate 0% . Report turnover daily . Non-EU, but EEA member . Remuneration . Conservative coalition government

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 10 Issuance of government bonds Issued to the market 2012 to 2020. Planned volume for 2021. In billions of NOK 80 80

70 70 71 60 64 65 60 60 62 50 50 52 50 50 50 40 46 40

30 30

20 20

10 10

0 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Source: Norges Bank

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 11 Borrowing requirement in 2021 As of 22 Dec. 2020

Borrowing requirement and financing 2021 . Planned borrowing is based on the 80 government’s estimated borrowing Drawing on govern- 70 Net lending to ment cash account requirement in the central government state banks 60 budget for 2021 50 Maturity of 40 bond debt outstanding Sale of . Redemption of existing bonds is the 30 government bonds main component behind the 20 borrowing requirement. This is the last 10 Other adjustments part of the refinancing of NGB 0 05/2021 Borrowing requirement Financing

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 12 The strategy for 2021 in brief Published 22 Dec. 2020 Government Debt Management will

. Issue government bonds worth 65bn, a decrease of 6bn from 2020;

. 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 swaps in 2021

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 13 Bond issuance split by maturity in 2021 In billion NOK 90 90 80 1Y-3Y 4Y-6Y 7Y-9Y 10Y 80 70 70 60 60 50 50 40 40 25 25 30 25 30 20 20 20 20 7 5 2 2 5 10 3 3 5 10 3 30 9 0 6 0 JAN. FEB. MAR. APR. MAY JUN. JUL. AUG. SEP. OCT. NOV. DEC.

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 14 Maturity profile of government bonds Principal. Including the government’s own holdings. In billions of NOK. By mid June 2021

100 100

90 84 90 80 80

70 64 70 60 60 53 50 50 50 43 42 41 39 40 40 31 30 30

20 20

10 10

0 0 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031

Source: Norges Bank

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 15 SYNDICATION IN 2021

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 16 New 10 year government bond issued in February 2021

. 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 17 September 2031.

. The bond attracted an order book in excess of NOK 150 billion (excluding Joint Lead Managers) from more than 70 investors

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

. NGB 09/2031 was priced at MS-27 basis points implying a reoffer yield for investor of 1.289%. The bond pays an annual coupon of 1.25%

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 17 New 10 year government bond issued in February 2021

Allocation by region Allocation by investor type

Source: Norges Bank

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 18 OVERVIEW OF THE NGB MARKET

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 19 10-year yields in selected countries Percent. 2 Jan. 2017 – 16 Jun. 2021 4 4 US UK Norway Sweden Germany

3 3

2 2

1 1

0 0

-1 -1 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Sources: Norges Bank and Refinitiv Datastream

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 20 Government bonds and T-bills outstanding

Outstanding volume Outstanding volume In billions of NOK. 2012 – June 16 2021 As a percentage of GDP. 2012 – Q1 2021 600 600 Treasury bills Government bonds 25 25 Bonds and T-bills Bonds 500 471 464 466 530 500 451 459 452 511 428 424 20 20 400 400 15 15 274 289 300 469 447 300 383 390 400 344 338 394 10 10 200 200 5 5 100 197 100 162 84 86 76 74 66 58 61 64 0 0 0 0 2012 2014 2016 2018 2020 2012 2014 2016 2018 2020 Source: Norges Bank Sources: Statistics Norway and and Norges Bank

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 21 Foreign and domestic ownership of government bonds In billions of NOK and as a percentage of total outstanding volume. 2 Jan. 2012 – 16 Jun. 2021 500 100 Foreign sector (l.h.s) Domestic sector (l.h.s) Foreign sector (%) (r.h.s) 450 90 400 80 350 70 300 60 250 50 200 40 150 30 100 20 50 10 0 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Source: VPS (Norwegian Central Securities Depository)

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 22 Ownership shares for government bonds

Ownership shares by investor group Allocation in auctions Per cent. 2013 – 14 June 2021 By region in 2021. Per cent 100% 1% 2% 2% 2% 2% 2% 2% 1% 2% 2% 12% 10% 14% 16% 16% 17% 17% 80% 17% 15% 9% 16% 11% 12% 19% 9% 12% 14% 16% 60% 31%

40% 73% 68% 62% 60% 63% 61% 60% 61% 64% 59% 20% 9%

0% 2013 2014 2015 2016 2017 2018 2019 2020 2021 Foreign sector Banks Government sector Fund managers Other Life insur. and pension funds Norway Europe Americas Asia Source: VPS Source: Norges Bank

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 23 Liquidity in the government bond market

Turnover Norwegian government bonds Trades reported to OSE until 2017. Transactions Government bond auctions reported since PDs for 2018. 2013 – 14 Jun. 2021 Bid-to-cover. 2013 – 14 Jun. 2021 450 450 7 7 Average 2013 - 2020 Turnover NOK bn 400 400 6 6 350 350 5 5 300 300 250 250 4 4 2,9 200 200 2,8 2,9 2,8 2,8 3 2,2 2,5 3 150 150 2 2,6 2 100 100 2,2 50 50 1 1

0 0 0 0 2013 2015 2017 2019 2021 2013 2014 2015 2016 2017 2018 2019 2020 2021 Sources: Stock Exchange and Norges Bank Source: Norges Bank

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 24 TREASURY BILLS

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 25 Management of Treasury bills

Framework Strategy for 2021 . Uniform price auctions . Issue 6bn NOK when introducing . Listed on Oslo Børs (Oslo Stock new bills on every IMM date Exchange) . Issue 2bn NOK in all other . Primary dealer arrangement auctions . Four outstanding bills at any given . 20 auctions time . A new 12-month zero coupon bill issued on every IMM date . Reopenings of existing bonds between IMM dates

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 26 Ownership shares by investor group in Treasury bills End of year. 2013 – 14 June 2021 100% 100% 11% 20% 19% 17% 16% 22% 22% 26% 26% 4% 2% 3% 5% 80% 5% 1% 0% 5% 2% 2% 80% 1% 7% 9% 0% 2% 6% 3% 13% 3% 24% 36% 60% 38% 60% 27% 27% 43% 38% 34% 40% 40% 26% 40% 26% 29% 35% 22% 23% 20% 19% 21% 20% 28% 21% 17% 17% 12% 11% 11% 11% 11% 0% 0% 2013 2014 2015 2016 2017 2018 2019 2020 2021 Foreign sector Banks Government sector Fund managers Other Life insur. and pension funds

Source: VPS

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 27 www.debtnorway.no

. Mandate . Annual borrowing . Key indicators programme (quarterly) . Terms and conditions . Auction calendar . Daily and monthly . Sales methods data on yields . Quarterly report . Auction results . Monthly turnover . Quarterly borrowing data volume (range)

. Analyses

GENERAL INFORMATION GENERAL

PUBLICATIONS STATISTICS

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 28 Contact information and links

Contact information Useful links

Government Debt Management . Norges Bank – www.norges-bank.no . www.debtnorway.no . Ministry of Finance . Email: – www.finansdepartementet.no [email protected] . – www.ose.no . NewsWeb – www.newsweb.no . Statistics Norway – www.ssb.no

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 29 APPENDIX

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 30 Average time to refixing Years. 1 January 2015 – 16 June 2021

Source: Norges Bank NORGES BANK / GOVERNMENT DEBT MANAGEMENT 31 Issuance volume of new 10-year bond Cumulative. In billions of NOK. Q1 2015 – 16 June 2021 80 80 New 10-year bond Other bonds 70 70 60 60 29 50 25 50 21 23 40 24 23 23 40 21 15 17 25 17 30 18 17 30 12 11 18 15 15 11 15 42 20 20 36 38 20 6 29 6 6 25 26 26 27 25 27 10 22 21 23 21 22 21 10 15 18 16 18 18 10 13 13 11 11 0 0 Q1Q2Q3Q4 Q1Q2Q3Q4 Q1Q2Q3Q4 Q1Q2Q3Q4 Q1Q2Q3Q4 Q1Q2Q3Q4 Q1Q2 2015 2016 2017 2018 2019 2020 2021 Source: Norges Bank

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 32 Turnover in the secondary market by region Government bonds. 2017 – 14 June 2021

70% 70% 2017 2018 2019 2020 2021 60% 60%

50% 54% 53% 50% 56% 51% 40% 56% 40%

30% 30%

24% 20% 24% 20% 19% 23% 18% 15% 14% 15% 10% 20% 12% 10% 14% 9% 10% 7% 7% 0% 0% Norway Europe Americas Asia Sources: Primary dealers and Norges Bank

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 33 Turnover in the secondary market by counterparty Government bonds. 2017 – 14 June 2021 50% 50% 2017 2018 2019 2020 2021

40% 41% 40%

36% 32%

30% 32% 30% 26% 29% 24% 29% 26% 25% 20% 20% 21% 21% 19% 17% 16% 21% 10% 12% 10% 7% 9% 10% 3% 7% 9% 6% 5% 3% 1% 0% 0% 2%3% 0% Banks/Mortg. Funds incl. Interdealer Public Pension, Other comp. hedge funds broker authorities insurance

Sources: Primary dealers and Norges Bank

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 34 Disclaimer

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, or forming 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 evaluation of that debt. While Norges Bank applies its best efforts to include accurate information and the information herein is believed to be 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 some jurisdictions.

The information contained in this presentation does not constitute an offer for sale in the United States of America or in any jurisdiction in which such an offer would be unlawful. Norges Bank has not taken any action that would permit an offering of the securities 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 other jurisdiction in the United States of America and may not be offered or sold, directly or indirectly, in the United States of America unless the securities are so registered or an exemption from the registration requirement has been granted. Each person is required to inform himself accordingly, to observe and to comply with applicable restrictions. Norges Bank is by no means liable for any infringement of such restrictions. Furthermore, the restrictions and limitations listed and described herein are not exhaustive, 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, with Oslo District Court as legal venue, shall have exclusive jurisdiction in settling any dispute which may arise out of, or in connection with, this Investor Presentation.

NORGES BANK / GOVERNMENT DEBT MANAGEMENT 35 NORWEGIAN GOVERNMENT DEBT

JUNE 2021