OECD Working Papers on Sovereign Borrowing and Public Debt Management
OECD Working Papers on Sovereign Borrowing and Public Debt Management provide authoritative information on technical and policy issues in the area of public debt management (PDM) and government securities markets. Studies track closely structural issues, trends and challenges in government debt policies and markets. Topics include pressing government debt policy issues such as the measurement of sovereign risk; how to contain the cost of government borrowing operations; the use of electronic systems; sovereign asset and liability management (SALM); liquidity of markets in government debt; advances in risk management; the role of derivatives in PDM; linkages between PDM and monetary policy and the role of debt managers in pricing and managing contingent liabilities.
These studies are prepared for dissemination among sovereign debt managers, financial policy makers, regulators, financial market participants, rating agencies, and academics. By providing information on this highly specialised field of government activity and policy, papers aim to stimulate discussions among a wider audience as well as further analysis.
Assessing the Cost Effectiveness of Index-linked Bond Issuance
A Methodological Approach, Illustrated Using UK Examples
Sovereign index-linked bond issuance has grown significantly since the early 1980s, with nearly $2.5 trillion USD in bonds now in issue. Index-linked bonds have become a widely accepted part of the set of instruments that sovereign debt managers use for funding purposes and so the question of how to assess their cost effectiveness relative to other financing options is of increasing importance. This paper sets out a methodology for conducting such an analysis, the rationale behind it and ways in which such an approach could be further developed.
Keywords: government bonds, financial risk management, treasury securities, risk return, risk hedging
G32: Financial Economics / Corporate Finance and Governance / Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill;
G11: Financial Economics / General Financial Markets / Portfolio Choice; Investment Decisions;
H63: Public Economics / National Budget, Deficit, and Debt / National Debt; Debt Management; Sovereign Debt