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Central-government borrowing and debt
No. 1

Central government borrowing and debt 2023

In 2023, government debt fell for the third year in a row to its lowest level in more than 40 years. The low national debt underpins the fact that the central government has maintained the highest possible credit rating (AAA/Aaa) from the three largest international credit rating agencies for 20 years. Despite a surplus in government finances, domestic government bonds totalling around DKK 62 billion were issued in 2023. It is important to maintain a well-functioning and liquid government securities market that ensures the central government continuous access to stable and cheap funding. The central government's total interest expenses fell in 2023 from DKK 9.4 billion to DKK -1.7 billion, corresponding to -0.06 per cent of GDP. The decrease was driven, among other things, by gains on the buy-backs of bonds and increasing interest income from the central government's account deposits at Danmarks Nationalbank.



Key messages

Why is it important?

The publication Central Government Borrowing and Debt is Danmarks Nationalbank's annual report on government debt. There can be several reasons why a state incurs debt. For example, it may be due to considerations such as economic cycles or public investment spending. In Denmark, Danmarks Nationalbank manages central government debt.

Lowest national debt in over 40 years

Note:

Denmark's national debt from 1953-2023.

Source:

Statistics Denmark.

Summary of the year in review

Robust Danish economy despite interest rate hikes and financial turmoil 

The Danish economy was strong at the end of 2023, characterised by high employment and significant balance of payments and public finance surpluses. The main scenario in the government’s latest forecast in the Economic Survey continues to be a soft landing for the Danish economy.

2023 was another year characterised by significant uncertainty in the financial markets, with continued monetary tightening in the face of persistently high inflation and financial and geopolitical turmoil. Inflation remained high for much of 2023, but slowed significantly towards the end of the year. This led to rising market expectations of imminent monetary easing.

Danish government yields have generally followed the global interest rate trend, with a largely unchanged yield spread to Germany of around 0.2 percentage points at the end of the year. Despite interest rate hikes under monetary policy, interest rates on both Danish 2- and 10-year government bonds remained largely unchanged.

Government debt fell in 2023 to its lowest level in more than 40 years

The central government surplus reduced the national debt by DKK 29 billion to DKK 294 billion in 2023. This means that the national debt has almost halved since the Corona crisis in 2020 and amounted to 10.5 per cent of gross domestic product, GDP, the lowest level since 1977. The decrease was mainly due to domestic debt repayments.

Interest costs fell to record low levels

In 2023, total interest costs on government debt fell to DKK -1.7 billion. The decrease is mainly due to lower debt and buy-back of government bonds at lower prices than the issue price. The average yield on government bonds rose to the highest level in 10 years. Despite rising interest rates, the central government's interest costs remained low, as rising interest rates only slowly feed through to total financing costs.

Government issuance followed the 2023 target

In line with strategy, in 2023 the Danish government issued domestic government bonds worth approximately DKK 62 billion via tap sales and auctions. During 2023, the central government opened a new 10-year government bond, a new green 10-year government bond and a US dollar bond under the central government's EMTN (Euro Medium Term Note) programme. The issuance of inflation-linked bonds continued in 2023, and the strategy remains to build the programme to a total outstanding amount of DKK 40-60 billion.

Central government debt

Surplus on state finances

For the third year in a row, the net cash balance was in surplus. The central government surplus for 2023 was DKK 28.9 billion, equivalent to 1 per cent of GDP, and should be seen in light of the fact that the Danish economy has entered a new phase of moderate growth as price increases and higher interest rates have affected economic activity. However, activity has been fuelled by a strong pharmaceutical industry, which has also contributed to a significant increase in exports.

Government finances are also healthy from a European perspective. In contrast to comparable countries, the Danish state has had a surplus in public finances since 2020, as opposed to comparable countries that have operated with a deficit in the same years, see Chart 1

Chart 1

Danish public finances are healthy in a European perspective

Note:

General government surplus as a share of GDP compared to comparable countries in the Euro area.

Source:

Eurostat.

Box 1

How government debt is calculated

Three concepts are often used to describe government debt:

  • Government debt is calculated as the nominal value of the central government's domestic and foreign debt less the balance in the central government's account at Danmarks Nationalbank, bonds for financing subsidised construction and the assets in the central government funds: Innovation Fund Denmark and the Danish Foundation for Prevention and Retention. Central government debt is managed by Danmarks Nationalbank on behalf of the Danish Ministry of Finance.

  • EMU debt is a standardised statement of EU countries' debt and includes debt in the central government, regions, municipalities and social funds. The EMU debt is stated at nominal value. The debt is stated gross, but the public sector can consolidate the debt with claims against itself. This means, for example, that the central government’s and central government-owned companies’ holdings of bonds issued by public entities are deducted from the statement of the EMU debt. On the other hand, e.g. the portfolio of government-guaranteed mortgage bonds and the balance of the central government's account at Danmarks Nationalbank cannot be deducted. According to the EU's Stability and Growth Pact, the EMU debt-to-GDP ratio must not exceed 60 per cent.

  • Net public debt comprises financial assets and liabilities of the central government, regions, municipalities and social funds and foundations. The central government’s assets include the central government’s account with Danmarks Nationalbank, assets in government funds, on-lending to government-owned companies and the central government’s portfolio of equities and other securities. The net public debt is stated at market value and is thus affected by value adjustments of public assets and liabilities. International calculations of net public debt are made by, for example, the Organisation for Economic Co-operation and Development (OECD) and the International Monetary Fund (IMF).

Government debt at lowest level in more than 40 years

The central government budget surplus contributed to reducing the national debt by DKK 29 billion to DKK 294 billion by the end of 2023. In nominal terms, government debt has almost halved since the Corona crisis in 2020. Measured in relation to the size of Denmark, the national debt was 10.5 per cent of GDP at the end of 2023, which is the lowest level in more than 40 years, see Chart 2.

Chart 2

Government debt continues to fall

Note:

Denmark's national debt with and without on-lending to state-owned companies.

Source:

Statistics Denmark.

Government debt is calculated as the total domestic and foreign debt less the assets managed together with central government debt, see Box 1. The decrease in the national debt in 2023 mainly covers increased amortisation of domestic debt, see Chart 3. A continually increasing share of the central government's gross debt is offset by loans to government on-lending companies to finance major infrastructure projects, e.g. construction of the Fehmarnbelt project. Adjusted for on-lending, the national debt amounted to DKK 101 billion at the end of 2023, corresponding to 4 per cent of GDP.

Government debt policy in light of declining borrowing needs

Since 2011, government surpluses have continuously reduced government debt through lower net government issuance, i.e. a reduction in issuance and/or increased debt repayments. When central government’s borrowing requirement is reduced, the need to issue Danish government securities is also reduced. Central government can also repay the debt. This was the case, for example, in the years leading up to the financial crisis and after the Coronavirus crisis in 2020, see Chart 3 and 4. Over the past three years, the surplus on the central government's finances, excluding on-lending, has, in isolation, contributed to a sharp reduction in the central government's gross debt of approximately DKK 200 billion. The balance on the central government’s account was DKK 161.5 billion at the end of 2023, which is largely unchanged compared to year before, see Chart 4.

Chart 3

State budget surplus has led to large debt reductions

Note:

Surplus corresponds to net cash balance/net financing requirement. Re-lending administered by Danmarks Nationalbank, social housing and expenses financed by green bonds are offset, as these items are specifically financed by issuing government securities and not via the central government accounts (DAU balance). Reduction of debt is calculated net.

Source:

Government accounts 2000-2023.

Chart 4

The balance on the government's account is largely unchanged

Note:

Balance on central government's account at year-end.

Source:

Danmarks Nationalbank.

Despite the declining borrowing requirement, it is important that government issuance is maintained at a certain level in order to maintain a well-functioning and liquid government securities market. Annual issuance around the levels of recent years is deemed to be appropriate and sufficient to ensure good liquidity in the central government securities market.

It is important to maintain a well-functioning and liquid government securities market

Under normal market conditions – and given a responsible fiscal and monetary policy – a well-functioning and liquid government debt market ensures that the central government has continuous access to stable funding at low interest costs. This is essential to ensure countercyclical fiscal manoeuvring room, so that in the event of an acute increase in funding requirements, the central government will be able to issue larger volumes at a limited additional cost. This was the case during the Corona crisis, for example. 

Developing liquid and efficient domestic sovereign debt markets reduces the central government's interest costs by reducing the liquidity premium that investors demand to buy bonds.

The sovereign debt market is an integral part of the broader domestic capital market. Government bonds provide a safe price reference for other domestic bonds, such as mortgage and corporate bonds, allowing investors, including pension funds, to better manage their portfolios and ensure efficient risk allocation. Similarly, a well-functioning domestic capital market helps to ensure cheap financing for both businesses and homeowners, thereby supporting economic growth.

Consolidation of public debt supports the central government securities market

To support the central government securities market, for many years there has been focus on consolidating public borrowing directly in government bonds under government debt. Consolidation has also helped to reduce total public sector interest expenses.

The mid-2000s saw the start of the transition from government guarantees on state-owned companies' debt to on-lending to state-owned companies financed by issuing government securities, see Chart 5. In recent times, the funding behind social housing has also been centralised within central government. The central government has consolidated debt by purchasing debt instruments (on-lending) or government-guaranteed mortgage bonds (social housing) financed by issuing government securities. At the end of 2023, the total outstanding amount of on-lending and government-guaranteed mortgage bonds was DKK 193 and 155 billion respectively, corresponding to 60 per cent of the Danish state's total outstanding amount of government bonds.

Consolidation has been crucial to maintaining issuance at a level that ensures a well-functioning government securities market in a period of low funding requirements, see Chart 6. Maintaining a certain issuance requirement has made it possible to build large, liquid bond series in international benchmark size. In addition, sustained presence on the debt markets has maintained global investor awareness of Danish government securities, which proved particularly valuable when the Corona crisis began and the central government was still able to finance itself on the international debt markets. In the coming years, the outstanding amount of on-lending and government-guaranteed mortgage bonds is expected to increase further and will thus continue to support central government's borrowing needs.

By centralising borrowing with the central government, significant interest savings have been achieved. This is because investors are willing to pay a higher price for safer and more liquid government bonds. The centralisation of borrowing has not resulted in higher administrative costs for the central government.

Chart 5

The increased consolidation has created a transition from government guarantees to re-lending

Note:

Re-lending and guaranteed loans to state-owned companies.

Source:

Danmarks Nationalbank.

Chart 6

Consolidation continues to maintain issuance at a level that ensures a liquid government securities market

Note:

The projection of the central government securities market is based on the Ministry of Finance's latest medium-term projections for the central government's net financing requirement.

Source:

Danmarks Nationalbank and the Ministry of Finance.

Denmark's EMU debt is among the lowest in Europe

In 2023, Denmark's EMU debt is expected to end up at 30 per cent of GDP by the end of the year. This means that Denmark's EMU debt remains among the lowest in Europe and well below the 60 per cent of GDP limit set out in the EU's Stability and Growth Pact, see Chart 7.

Denmark's EMU debt is higher than the national debt because the EMU debt is a gross statement of the total public debt, see Box 1. For example, the central government’s account balance and holdings of social housing bonds are not offset in accounting of EMU debt.

Chart 7

Denmark's EMU debt is among the lowest in Europe

Note:

EMU debt for a number of European countries. EMU debt is a standardised statement of EU countries' debt and includes debt in the central government, regions, municipalities and social funds. The EMU debt is stated at nominal value. Data from Q3 2023.

Source:

Eurostat.

Denmark maintains the highest credit rating

For the past 20 years, Denmark has maintained the highest credit rating (AAA) in both domestic and foreign currency from the three largest international credit rating agencies and is one of only nine countries in the world with such a rating. The high credit rating is primarily a result of a robust and resilient economy, low public debt and a long history of responsible and well-organised fiscal policy.

The high credit rating means that investors demand a low credit risk premium when investing in Danish government bonds. That allows central government to borrow at lower interest rates than less creditworthy countries and thus helps to keep the central government's total financing costs down, see Chart 8.

Chart 8

A high credit rating means lower borrowing costs

Note:

Credit ratings and yields on 10-year government bonds for selected European countries. The interest rates in the Chart are calculated as the average of the last two months of the year. 

Source:

Nordea Analytics and Moody's.

Government interest costs

Government interest costs fell despite rising interest rates

In 2023, the total interest costs on government debt fell from 9.4 to DKK -1.7 billion, equivalent to -0.06 per cent of GDP. The decline is due to a combination of lower debt, less index revaluation and purchases of government bonds at prices lower than the issue price, see Chart 9. Adjusted for interest income from on-lending, central government interest expenses in 2023 amounted to DKK -3.3 billion, which corresponds to -0.12 per cent of GDP.

The decrease in central government interest costs has occurred despite a rising interest rate level in 2023. With a high average fixed interest rate period on government debt, it takes an average of around 7 years for interest rate increases to impact the central government's interest costs, see also chapter 6 on risk management. This is because the interest rate level only affects the interest expenses on newly issued debt and does not affect the central government's interest expenses on the part of the debt that has already been raised.

Chart 9

Decomposition of government interest costs

Note:

Annual gross interest costs for total central government debt in DKK billion. Negative amounts constitute revenue. The central government’s interest income from on-lending has not been offset in the chart.

Source:

Danmarks Nationalbank.

Higher government financing costs in 2023

Rising interest rates for much of the year meant that it was generally more expensive for the central government to issue debt in 2023. Both the 2- and 10-year government yields rose from around 2.50 per cent p.a. to 3.20 per cent p.a. towards the end of October, see Chart 10. During the same period, more than 80 per cent of the year's bond issues were made. Towards the end of the year, interest rates fell significantly on the back of increasing market expectations of imminent monetary easing.

Chart 10

Significant fluctuations in short- and long-term bond yields over the year

Note:

The graph shows the yield to maturity on government benchmark securities. Danish state 2.25 per cent 2033 replaced Danish state 0.00 per cent 2031 as the benchmark on 8 February 2023, while Danish state 1.75 per cent 2025 replaced Danish state 0.00 per cent 2024 on 1 April 2023.

Source:

Bloomberg.

Overall, this meant that the average yield to maturity on nominal government bond issues rose to 2.87 per cent p.a., see Table 1. This was an increase of 1.74 percentage points from 2022 and the highest average yield to maturity in the last ten years. On issues in the inflation-indexed bonds, the average effective real interest rate was 0.68 per cent p.a. in 2023.

Table 1

Yield to maturity on government bond issuances

 

Average maturity, years

Average yield to maturity, 
per cent p.a.

2014                                           

9.3

1.11

2015                       

6.8

0.32

2016                       

7.4

0.04

2017                       

7.5

0.15

2018                       

7.5

0.14

2019                       

7.8

-0.33

2020                       

11.6

-0.33

2021                       

10.4

-0.20

2022                       

9.33

1.13

2023                       

7.8

2.87

Note:

The yield to maturity is weighted by market value and excludes inflation-indexed bonds in the central government's total issuance (including swap operations) in the given years.

Source:

Danmarks Nationalbank.

Government issuance

Government issues in 2023 followed the target for the year

In line with strategy, in 2023 the Danish state issued domestic government bonds for DKK 61.8 billion at market value via tap sales and auctions. Issuance was spread fairly evenly throughout the year, with an overweight in the last quarter when a new green 10-year government bond was opened, see Chart 11. 

As in recent years, demand varied significantly throughout the year, making it challenging to evenly distribute issuance, see Chart 12. Especially in the first half of 2023, the variation was high and generally reflected large fluctuations in the global risk landscape, with increased uncertainty about the state of the US banking sector dominating.

Focus on the 2- and 10-year maturity segments

Government bond issuance in 2023 focused on the 2- and 10-year maturity segments with nominal issuance of DKK 20 and 29 billion, respectively, corresponding to a total of 79 per cent of the year’s issuance. Due to the low level of government debt, the majority of government issuance is focused on a few core securities, which are built up to benchmark size to ensure good liquidity. At the same time, the vast majority of investor demand is in the 2- and 10-year maturity segments, which also serve as important reference points for the Danish capital market.

On 8 February 2023, the central government opened a new 10-year government bond maturing in 2033. At the opening auction, the maximum announced DKK 5 billion was issued, while there were bids for DKK 6.4 billion. The issues were made at an interest rate of 2.57 per cent p.a. In total, DKK 34.5 billion at market value in the new 10-year government bond in 2023 was issued during the year, of which just under DKK 6.5 billion was issued at switch auctions.

Chart 11

Government bond issuance has been spread evenly throughout the year

Note:

The chart shows bond sales at market value excluding switch auctions. Sales are calculated by value date.

Source:

Danmarks Nationalbank.

Chart 12

Issue volume at auctions in 2023 varies

Note:

The chart shows the difference between the intended average issue size (excluding opening auctions) and the allocated volume at each auction in 2023. The average is calculated by dividing the issue target (excluding issues at opening auctions) by the number of auctions held during the year.

Source:

Danmarks Nationalbank.

Inflation-linked bond issuance continued in 2023

In 2023, the Danish government issued inflation-linked bonds totalling DKK 4.9 billion at market value, bringing the total outstanding amount to a nominal DKK 35.2 billion. The issues were made in the central government's two inflation-indexed government bonds: 0.10 Danish state 2030i and 0.10 Danish state 2034i. The strategy remains to build the programme to a total outstanding amount of DKK 40-60 billion spread across three government securities.

The central government's inflation-indexed loan programme helps to ensure a broad investor base, which contributes to higher and more robust demand for Danish government securities. Inflation-linked bonds offer investors a return that follows the development in Danish consumer prices, see Box 2, and the bonds are therefore attractive to investors who need to hedge their liabilities against inflation, such as the insurance sector and parts of the pension sector. 

Inflation-linked bonds are also attractive to the central government as they help spread the risk of the central government's debt portfolio. This is achieved through two channels: Firstly, inflation-linked bonds dampen fluctuations in government debt as a share of GDP, as inflation-linked debt and GDP falls and rises in line with changes in consumer prices. Secondly, under certain circumstances index-linked bonds can reduce the central government's overall budget risk. The risk management of inflation-linked bonds, including management of the first maturity in the programme, is elaborated on in section 6.

Box 2

Inflation-linked bonds

What is an inflation-linked bond?
During the term of an inflation-linked bond, its principal will be adjusted in line with the development of consumer prices. At maturity, the redemption amount is the inflation-indexed principal amount. However, Danish inflation-linked government bonds have a deflation floor, which ensures that investors always receive back at least the full nominal principal.

Expressed as a percentage, the coupon rate on an index-linked bond remains fixed, but since the actual coupon rate payment is calculated based on the inflation-adjusted principal, the amount will also vary with consumer prices. Coupon payments, unlike principal, do not have deflation protection and will therefore always be a percentage of the indexed principal.

When the central government issues inflation-indexed bonds, future government interest costs in real terms are already known at the time of issue. However, unlike nominal conventional bonds, nominal payments will remain unknown until the bond matures.

What is breakeven inflation?
Breakeven inflation is a key concept in the assessment of ​central government's expected costs of issuing inflation-linked bonds compared to nominal bonds. Breakeven inflation is an expression of the expected future average realised inflation level where the central government's costs of issuing inflation-indexed and nominal bonds are the same. In practice, breakeven inflation is often calculated as the yield spread between nominal and inflation-linked bonds with the same maturity:

Break-even inflation ≈ nominal interest rate - real interest rate

If the realised average inflation rate turns out to exceed the breakeven inflation rate (observed at issuance), it would, seen in isolation, have been cheaper for the central government to issue nominal bonds rather than inflation-indexed bonds and vice versa. See examples in charts A and B. 

Chart A

Principal and coupon payments vary with the development in the price index from maturity of the bond

Chart B

Strong demand for new green 10-year government bond

On 26 September 2023, the central government's new green 10-year government bond was opened using the syndication issuance method. This was the first time a domestic Danish government bond was issued using this issuance method. The method is widely used among other sovereign issuers and can in some cases contribute to a broader investor base, which is one of the objectives of the central government's green loan programme.

Investor interest at the opening was strong and broadly distributed across geographic areas with a total sale of 43 per cent to foreign investors compared to an average of 32 per cent of the total outstanding debt in DKK. The transaction also attracted a wide range of investor types, most of which had a relatively long investment horizon, such as asset managers and pension funds.

Upon syndication, DKK 7.75 billion nominal value was issued at a yield to maturity of 3.053 per cent, which corresponds to a green premium of 1.5 basis points, see box 3. In comparison, the central government's first green bond issue in 2022 was issued with a green premium of ca. 5 basis points at the opening auction. In general, green premiums have been declining in recent times, see Chart 13. This may be partly due to the fact that the supply of green government securities has increased significantly and that some investors are increasingly using sophisticated models to assess issuers' ESG ratings. The latter means that these investors can also buy non-green bonds from issuers with a high ESG rating.

The new green 10-year government bond was sold later in the year at the central government's ordinary auctions, increasing the outstanding amount to just under DKK 10 billion market value, in line with the strategy.

Chart 13

Danish state achieves a high green premium

Note:

The chart shows the green premium for Danish 10-year government bonds and the green premium on equivalent German government bonds.

Source:

Bloomberg.

Box 3

Green bonds

What are green bonds?
Green bonds are any type of bond instrument where an amount equal to the yield is linked to the financing or refinancing of new and/or existing suitable green projects/expenditures. With the issuance of a central government green bond, an amount corresponding to the yield from the sale will be allocated to green government expenditures which support the production of renewable energy in the form of wind and solar energy and the green transition of the transport sector.

Denmark has high green ambitions and strives to be a frontrunner when it comes to mitigating climate change and realising the necessary transformation of our society. Linked to this are expenses that, since the establishment of the Danish government's "Green Bond Framework" in 2022, have been included as green expenses linked to the issuance of green government bonds. You can read more about the specific costs of the central government's green bond programme on the Ministry of Finance's website.

The framework for the green bond, including the criteria for the selection of green expenditure, is described in the central government's Green Bond Framework. The Green Bond Framework is prepared in line with best market practice, and green expenditure is evaluated and selected based on the criteria of the EU classification system for sustainable economic activities (EU Taxonomy). In addition, independent assessments of the central government's framework are obtained. For example, Cicero, an external consultancy with climate and environmental expertise, has given Denmark's Green Bond Framework a "dark green" rating, the highest possible. Government Debt Management monitors and updates the central government's Green Bond Framework as necessary.

What is a green premium?
Green bonds can be issued with a so-called green premium, which is the difference between the interest rate on a green bond and the interest rate on a similar conventional bond. As such, a green premium is a price advantage for issuers that arises from investor willingness to pay more to ensure that the proceeds can only be used to fund green projects and expenses.

Why does central government issue green bonds?
Denmark is widely regarded as a global leader in sustainability with top rankings in several recognised international ESG indices and rankings. Among other things, Denmark is ranked highest out of 65 countries on the international Climate Change Performance Index, which assesses climate efforts of countries. A review of Denmark's ranking in these indices and links to read more about them can be found on the Danish Government Debt Management's website.

Denmark began issuing green government bonds from 2022 to support the transition to a sustainable economy and the development of green capital markets dedicated to financing this transition. The issuance of green government bonds was also designed to meet the significant increase in demand for green assets from investors.

Green bonds are issued as twin bonds
The twin bond model was launched by Germany in 2020. The model entails that the central government’s green bond is issued with the same financial characteristics as one of the central government’s existing conventional on-the-run issues. This means that the central government’s 10-year green bond has the same maturity, coupon and repayment profile etc. as its 10-year benchmark bond. The twin bond model also supports the liquidity of a green bond by allowing investors to swap the green "twin bond" one-for-one for the equivalent and more liquid conventional twin bond at any time. The exchange facility is only one-way, so the investor does not have the option to exchange the conventional twin bond for the corresponding green twin bond.

Short-term loan programmes maintained at a low level

The central government's short-term loan programmes, treasury bills (T-bills) and commercial papers (CP), are an important part of the central government's liquidity resources. Since the Corona crisis in 2020, the outstanding amount in both programmes has been reduced significantly and was maintained at a low level through 2023, see Chart 14.

At the end of 2023, the outstanding amount in T-bills was DKK 12.4 billion. During the year, the issues were sold at an average yield to maturity of 3.03 per cent p.a. In the CP programmes, the outstanding amount at the end of 2023 was DKK 2.75 billion. The strategy remains to maintain market access to the international capital markets via the CP programmes.

Chart 14

Outstanding amounts in the central government's short-term loan programmes kept at a low level

Note:

Outstanding amounts in the central government's two commercial paper programmes (ECP and USCP) and outstanding in T-bills.

Source:

Danmarks Nationalbank.

Foreign borrowing maintains access to international debt markets

Under the Danish government's EMTN programme (Euro Medium Term Note), a new 2-year dollar bond was issued on 7 November 2023 with proceeds of USD 1.5 billion, equivalent to DKK 10.5 billion. Demand was high, especially from central banks and other official institutions. The loan was taken out at a yield to maturity of 5.02 per cent p.a., corresponding to 9 basis points above a corresponding US government security. This is the best pricing relative to US government bonds that the central government has achieved on a US dollar-denominated issue in recent history.

In order to maintain the best possible access to the largest and most liquid international debt markets, the strategy is to be regularly present in currencies other than DKK, e.g. through the central government's EMTN programme. Government borrowing in foreign currency amounted to approx. 4 per cent of its total debt at year-end 2023.

Issuances are made regularly to ensure that the central government's EMTN programme is a well-functioning source of funding, including that processes are maintained and that international investors and market participants are active investors in Danish government debt denominated in foreign currency. A prerequisite for this is that the central government has a regular presence on these markets.

Borrowing in foreign currency is not used to finance the central government's ongoing financing needs, but only supports the liquidity preparedness of the central government and the foreign exchange reserve. Furthermore, issuing bonds in foreign currency helps to diversify the central government's investor base, which in the long term can lead to lower funding costs as investors in foreign-denominated government debt become active in the domestic government debt market. Therefore, the central government will continue to issue annually in foreign currency.

Foreign ownership in Danish government bonds helps diversify the investor base

A diversified investor base makes the government debt market more resilient to changes in local market conditions. Danish government bonds are owned by a wide range of investors, but the majority are owned by domestic investors. Among others, the Danish insurance and pension sector has a natural need to hedge their long-term liabilities and is therefore the largest investor group with an ownership share of 55 per cent by the end of 2023, especially in the longer maturity segments, see chart 15.

Increased interest in issuance in Danish kroner from foreign investors will increase the central government's access to funding and will thus contribute to liquidity and lower funding costs for the central government. The increased liquidity also favours domestic investors.

Foreign investors have maintained their ownership share of Danish government bonds in 2023 and still account for around 32 per cent by the end of the year, see chart 16. The lower foreign ownership share in the last months of the year should be seen in light of the relatively high ownership share of 41 per cent of the two series maturing in November 2023.

Danish government bonds are attractive to foreign investors as a result of a high additional gain from currency hedging to the euro and dollar and the spread to German government bonds.

Chart 15

Ownership shares by remaining maturities

Note:

Ownership of Danish government bonds in DKK.

Source:

Danmarks Nationalbank.

Chart 16

Investor distribution of Danish government bonds

Note:

Ownership shares of Danish government bonds.

Source:

Danmarks Nationalbank.

Trading and liquidity in the secondary market

Supporting the secondary market

The central government actively supports the secondary market to ensure good liquidity and thereby minimise the central government's financing costs. Good liquidity reduces the liquidity premium that investors demand for buying the bonds. It is therefore less expensive for the central government to issue debt when the bonds have good liquidity.

The secondary market is supported both through buy-backs and tap sales, but also through switch auctions, where the central government's primary dealers and investors have the opportunity to buy liquid on-the-run securities against selling off-the-run securities, see Chart 17. Buy-backs can contribute to levelling out the central government's repayment profile and take into account the outstanding amount of the central government's off-the-run securities. A prerequisite for the central government's activities in the secondary market is that trades can be made at fair market prices. This implies that there is a reasonable correlation between the prices of government securities bought and sold.

Chart 17

Buying and selling in the secondary market

Note:

Sales and buying are recognised at market value. Buying excludes buying bonds maturing within the year.

Source:

Danmarks Nationalbank.

Negative net government issuance in 2023

During 2023, the central government issued DKK 75.2 billion at auctions, tap and switches, while buy-backs was worth DKK 38.3 billion with maturities later than 2023 and redemption and buy-backs for DKK 70.0 billion with maturity within the year. This resulted in a net issuance of DKK 33.1 billion, see Chart 18. This contributes to the fact that the Danish national debt, as mentioned in the previous section, was reduced over the year.

Chart 18

Government net issuance

Note:

Net issuance is calculated as the sale of government bonds via auctions, tap and switch auctions less the central government's buying of bonds maturing outside the year via tap and switch auctions and redemption of bonds maturing within the year.

Source:

Danmarks Nationalbank.

Trading costs decreased over the year

Liquid markets are typically associated with relatively low trading costs. The cost of trading Danish government bonds can be measured, for example, by the spread between bid and ask prices on the interdealer platform MTS Denmark.

In 2023, the spread narrowed in both the 2- and 10-year segments, ending the year at around 1 basis points., see Chart 19. Within the year, there were significant fluctuations due to changes in the global risk landscape. For example, the turmoil in the US banking sector in particular in the spring led to a sharp increase in spreads in both the 2- and 10-year segments. Tensions then gradually normalised after a quick intervention by the US authorities. The development in the Danish government debt market is in line with what has been observed in other comparable government bond markets.

Chart 19

Bid and asking price spreads in 2- and 10-year points

Note:

The bid-ask spread is calculated as a 5-day moving average of the difference between the best bid and ask prices for a given volume over 5 hours per day.

Source:

MTS Denmark.

Risk management

Risk management of government debt can be divided into three main categories: market risk, refinancing risk and liquidity risk. Market risk is mainly related to risks associated with changes in interest rates, as the central government debt has limited currency and credit risks. Scenario calculations, interest rate simulations and the total duration of the central government debt are used to illustrate the market risks of the central government debt. This ensures that the total interest costs on government debt are resilient to significant interest rate changes.

To manage refinancing risk, the focus is on an even repayment profile for government debt, supplemented by monitoring the size of the short-term refinancing scope. This smooths out the refinancing of existing debt over the years. Furthermore, it ensures that the central government has sufficient liquidity to cover financial obligations, including unexpected expenses or lack of market access.

Central government has maintained low interest rate risk

For 2023, the average duration for the year came in at 12.1 years, which is within the expected duration band of 11.75 ± 1 years. This is an increase compared to previous years, see Chart 20. The increase is primarily due to a high balance on the central government account, which is recognised on the asset side in the duration calculation. Thus, the increasing duration does not reflect changes in the maturity profile or risk strategy for government debt.

The central government's duration calculated without the account continues to develop steadily in 2023, reaching an annual average of around 8.4 years for 2023. This locks in a large part of the central government's interest payments on average 8.4 years into the future, which contributes to robustness against interest rate fluctuations.

Chart 20

Fluctuations in duration are primarily due to the central government's account

Note:

Duration is calculated for domestic and foreign debt, government funds, on-lending to state-owned companies and central government's account. Duration has been calculated without discounting.

Source:

Danmarks Nationalbank.

Continued low expected interest costs in the base scenario

Over the next 6 years, interest costs excluding capital losses and index revaluations are expected to beat a low level of around DKK 1-3.5 billion in a neutral base scenario with a balanced primary public balance and where the forward rate structure is realised, see Chart 21.

Danish government interest rates have been rising throughout 2023, with a decline towards year-end, see Chart 10. Despite rising interest rates, central government's interest costs are expected to increase to a limited extent and then decrease marginally. This development should be seen in light of the maturity profile of government debt, where the majority of the total debt has a fixed interest rate. The higher interest rate level will impact coupon payments as existing debt needs to be refinanced. The central government's high account balances will also contribute significant interest income, which pulls down interest costs. In practice, the central government's interest costs are highly dependent on its financing needs, which is why Chart 21 should be understood as a stylised base scenario. 

Chart 21

Central government debt is robust against interest rate increases

Note:

Projection of central government's interest costs excluding index revaluations and revaluation losses in a base scenario with a balanced primary balance and where the forward rate structure is realised. The decrease in interest income from the central government's account reflects the fact that the balance on the central government's account is expected to be reduced over the coming years by contributing to covering the financing requirement.

Source:

Danmarks Nationalbank.

Chart 22

Scenarios for interest rate risk in 2024

Note:

Change in interest costs for 2024 in a scenario where the yield curve shifts parallel or steepens, i.e. short-term interest rates fall and long-term interest rates rise. The changes have been calculated in relation to the scenario in which the forward interest rate structure is realised. The interest rate scenarios are defined as in the European Banking Authority's guidelines for interest rate risk management in the banking book (IRRBB).

Source:

Danmarks Nationalbank.

Debt profile is robust against EBA interest rate increase scenarios

Central government's interest costs for 2024 are expected to fall by just over DKK 2 billion in the scenario from the European Banking Authority, EBA, where the yield curve is shifted upwards in parallel by 2 percentage points, see Chart 22. This is because a higher short-term interest rate has an immediate effect on central government's high account balances, while the scope of new issues for a single year is limited due to the steady amortisation profile of central government debt.

Overall, a steep yield curve where short-term interest rates fall while long-term interest rates rise will lead to an expected increase in the central government's interest costs for 2024 corresponding to just over DKK 1.2 billion, see Chart 22. In such a scenario, a lower short-term interest rate would mean lower income on government account balances, which would favour higher interest costs. Rising long-term interest rates also mean that new issues for 2024 are issued at higher interest rates.

The central government is a net recipient of the short-term interest rate

The amount of government assets that earn interest at a short-term rate exceeds the amount of liabilities that earn interest at a short-term rate, see Chart 23. This is due to the central government's high account balances, which are subject to variable interest rates.

Government account balances contribute significantly to fluctuations in the interest costs of government debt when interest rates change, see Chart 22. Through 2023, there has been an increase in the volume of interest rate swaps via which the central government receives the fixed interest rate and pays the variable interest rate. Since the central government pays a variable interest rate in this type of interest rate swap, the increased swap size reduces the exposure to short-term interest rates. Consequently, interest rate swaps can be used to increase the stability of the central government's interest costs.

Chart 23

Government short-term interest-bearing assets and liabilities

Note:

The Chart shows the central government's assets and liabilities, calculated as a total principal amount that carries a short-term interest rate. Net interest rate swaps cover the central government's interest rate swaps, which receive fixed interest and pay variable (short-term) interest, less interest rate swaps where the central government pays fixed interest and receives variable (short-term) interest. Net is the sum of the items, where a positive value means that the central government is a net recipient of the short-term interest rate.

Source:

Danmarks Nationalbank.

There will often be a trade-off between stabilising interest costs while aspiring to reduce fluctuations in market value. In a scenario where the central government exclusively issued a 30-year bond, central government debt would achieve high interest rate stability but potentially large market value fluctuations. The opposite would be the case if the central government only issued T-bills. However, since the central government has more floating-rate assets than liabilities, interest rate swaps can initially increase interest rate stability while reducing market value risk. Stability is a result of a better match between government debt assets and liabilities.

Government debt refinancing and liquidity risk

Government debt refinancing risk is the risk of having to issue debt at extraordinarily high interest rates or, in extreme cases, not being able to access the loan market. Through 2023, the short-term refinancing volume has remained relatively stable at just under DKK 100 billion, corresponding to approximately 17 per cent of gross debt, see Chart 24. For a given month, the short-term refinancing volume calculates the amount of existing debt that needs to be refinanced within the next 12 months.

In addition to the low short-term refinancing volume, the central government debt's even repayment profile contributes to the stability of the refinancing volume over time and thus the refinancing risk. 

Chart 24

The short refinancing scope

Note:

Each column shows the next 12 months maturity of domestic bonds, T-bills (SKBV), foreign currency bonds (EMTN) and commercial papers.

Source:

Danmarks Nationalbank.

Liquidity risk for government debt covers the risk of not being able to meet financial obligations due to a lack of market access or insufficient deposits in the central government's account. In day-to-day liquidity management, projections of deposits in the central government's account are monitored to ensure that the central government has liquidity to cover expected payments and a buffer to cover unexpected liquidity drains.

Purchases of inflation-linked bonds maturing in 2023 reduced the central government's index risk in 2023

In 2023, Debt Management actively reduced the outstanding amount in the index-linked bond DGBi 0.10 per cent 2023 to reduce the risk of having to pay a high final coupon and principal in the event of a positive inflation shock, see Chart 25. As the remaining maturity of the central government's inflation-indexed bonds is reduced, the risk of major fluctuations in the indexation due to surprisingly high or low inflation figures increases. This made the central government's inflation-linked bond maturing in 2023 sensitive to the consumer price index for August and September. Furthermore, as inflation-linked bonds are often used by investors to hedge their long-term liabilities, there will be a natural demand for the central government to buy the paper. Buying totalling almost DKK 11 billion was spread evenly over 2023.

Chart 25

Acquisition of DGBi 0.10 per cent 2023 reduced the central government's index risk

Note:

The chart shows the total outstanding amount, measured in nominal terms, of the inflation-linked bond DGBi 0.10 per cent maturing in 2023.

Source:

Danmarks Nationalbank.

On-lending and central government guarantees

By consolidating public debt, the central government can reduce total public financing costs, as it can issue debt at a lower interest rate than, for example, individual state-owned companies. This is mainly because the central government can build up larger bond series and ensure good liquidity, which increases the liquidity premium that investors are willing to pay. In practice, consolidation is achieved by the central government providing on-lending to state-owned companies, see Box 4. On-lending is financed as part of the central government's total debt issuance. In addition, in some cases state guarantees are granted, which also helps to reduce the financing costs of state-owned companies.

During 2023, new on-lending was granted for a total of DKK 68 billion, bringing the on-lending volume to 32 per cent of total outstanding domestic government debt. This corresponds to an increase of 22 per cent compared to 2022, where A/S Femern Landanlæg and Femern Bælt A/S together now account for 16 per cent of all on-lending. At the end of 2023, the central government managed government loan guarantees for DKK 7.7 billion, which is a decrease of 22 per cent compared to 2022. See Table 2 for an overview of government on-lending. 

Box 4

On-lending to government-owned companies

In connection with on-lending, the central government-owned company takes out a loan directly from the central government. The loan is disbursed from the central government's account to the company, and the resulting increase in the central government's financing needs is covered by the central government issuing bonds. The companies pay interest and make amortisations to the central government corresponding to the terms for government bonds. In addition, an annual commission rate is paid in accordance with LBK 849 of 22 June 2010. When a company requests on-lending, the price of the loan is fixed based on the market price of the corresponding government bond.

On-lending is based on a political wish to support selected projects through cheaper financing. As a result of the central government’s high creditworthiness, on-lending means, just like government-guaranteed loans, that the company can obtain financing at a lower cost than if it had to raise the loan itself on the market. Financing via on-lending will normally be less expensive than if the company financed itself by issuing its own government-guaranteed bonds. One reason for this is that the government bond series have much higher liquidity. The company thus saves the liquidity premium that investors would otherwise demand in the form of a higher yield.

On-lending increases the government’s borrowing needs because the on-loans are covered by increasing borrowing or by drawing on the central government’s account. On-lending also increases the central government debt because the central government’s asset in the form of the on-loan to the company is not offset in the calculation of the central government debt.

The transaction flows between the three players in relation to on-lending

Chart

Establishment of the Danish Export and Investment Fund, EIFO

On 1 April 2023, Denmark's Green Investment Fund, EKF Denmark's Export Credit and the Danish Growth Fund were merged under the Danish Export and Investment Fund, EIFO. This means that EIFO manages approximately DKK 71.8 billion annually under the on-lending framework at Danmarks Nationalbank.

Table 2

On-lending in 2023

DKK billion

Holding,
year-end 2022

Grossuptake in 2023

        Amortisations and prepayments
in 2023

Holding,
year-end 2023

A/S Femern Landanlæg

14.3

10.0

-

23.1

A/S Storebæltsforbindelsen

17.9

2.4

3.3

17.2

A/S Øresundsforbindelsen

12.0

2.5

1.7

12.9

Denmark's Export and Investment Fund

23.9

36.4

26.0

35.2

Denmark’s Green Future Fund

0.5

0.2

-

0.7

Danmarks Skibskredit A/S

0.1

-

0.1

-

DR (Danish Broadcasting Corporation)

2.6

0.6

0.6

2.6

Energinet

31.6

6.2

3.3

34.8

Evida Holding A/S

2.5

-

-

2.5

Femern Bælt A/S

7.2

-

-

7.2

Hovedstadens Letbane I/S

2.3

2.1

0.2

4.9

Investeringsfonden for Udviklingslande (IFU)

0.4

0.4

-

0.8

Kalaallit Airports
International A/S

0.6

0.1

-

0.8

Metroselskabet I/S

31.8

3.2

4.1

31.1

Naviair

0.5

-

-

0.5

Scandinavian Airlines System

1.1

-

-

1.1

Sund & Bælt Holding A/S

0.3

0.2

-

0.5

Udviklingsselskabet
By & Havn I/S

14.8

4.1

2.5

17.4

Total

164.5

68.3

41.8

193.2

Note:

The portfolios of on-lending are stated at nominal value, while gross borrowings, amortisation and prepayments are stated at market value.

Source:

Danmarks Nationalbank.

Table 3

Loan guarantees managed by Danmarks Nationalbank on behalf of the central government

Year-end 2023

DKK million

A/S Femern Landanlæg

1308

A/S Storebæltsforbindelsen

877

A/S Øresund

808

DR (Danish Broadcasting Corporation)

436

DSB

164

The Danish Guarantee Fund for Non-life Insurers

23

Kalaallit Airports International A/S

450

Øresundsbro Konsortiet I/S

3594

Total

7660

Note:

The figures include guaranteed swaps.

Source:

Reports from state-owned companies.

Social housing

Since 2018, the Danish government has been buying mortgage bonds to finance subsidised construction, such as social housing. The bonds are purchased at the central government interest rate, which ensures that the financing of social housing is done on the same terms as the central government. The purchases have contributed to further consolidation of public debt, which reduces public interest expenses and contributes to the maintenance of a well-functioning government debt market, as central government can maintain a higher issuance volume of Danish government bonds.

During 2023, the central government purchased bonds to finance subsidised construction for DKK 7.3 billion, excluding the year's maturities. This is a decrease of 68 per cent compared to the previous year. The large decrease is due to a significant reduction in purchases from DKK 28 billion in 2022 to DKK 13.9 billion in 2023. The current holding represents 26 per cent of the total outstanding government bonds.

In 2024, the central government is expected to buy bonds to finance subsidised construction for approx. DKK 13 billion, and will have a maturity of DKK 7.1 billion, see Chart 26.

Chart 26

Maturity profile for mortgage bonds for financing subsidised construction

Note:

Maturity size of bonds purchased in connection with subsidised construction per year. Values are stated at nominal value. 

Source:

Danmarks Nationalbank.

Government funds

On behalf of the Danish state, Danmarks Nationalbank manages the administration of the funds in Innovation Fund Denmark and Fund for Better Working Environment and Labour Retention. The assets of the two funds are offset in the calculation of central government debt and are managed together with the central government's other financial assets and liabilities under the central government debt area.

On 2 May 2023, the Den Sociale Pensionsfond (social pension fund) was closed by law after having no funds since 2021, and the fund is no longer included in central government accounts.

Innovation Fund Denmark

The assets in Innovation Fund Denmark totalled DKK 12.3 billion at the end of 2023, see Table 5. Of these, 99.8 per cent of the assets are invested in Danish government bonds, while the remaining percentage is held in the central government's account. In 2023, DKK 400 million was transferred to the Ministry of Higher Education and Science, mainly for new initiatives that promote growth and job creation through knowledge. The transfers were mainly financed through the sale of government bonds and, to a lesser extent, through interest income in the fund, see Table 4.

Fund for Better Working Environment and Labour Retention

The assets in the Fund for Better Working Environment and Labour Retention totalled DKK 0.71 billion at the end of 2023. This is an increase of 2.5 per cent from the previous year, which mainly stems from interest income from both investment in Danish government bonds and investment of funds in the central government's account. For most of 2023, the assets have been invested in government bonds maturing in the same year. By the end of 2023, all funds were placed in the central government's account at Danmarks Nationalbank. The fund only invests in Danish government bonds and there were no transfers from the fund in 2023.

Table 4

Fund income and expenses in 2023

DKK million

Innovation Fund Denmark

 

Fund for Better
Working Environment
and Labour Retention

Revenue

 

 

 

Interest, etc.

19

 

19

 

 

 

 

Expenses

 

 

 

Transfer to Ministry

400

 

-

 

 

 

 

Difference

 

 

 

Net income

- 381

 

19

Note:

  1. Net statement of interest received, interest receivable and distributed capital losses on buy-backs.
  2. 2. Pension yield tax is paid on yields for the previous year.

Source:

Danmarks Nationalbank.

Table 5

State fund assets at the end of 2023

 

Innovation Fund Denmark

Fund for Better Working
Environment and Labour Retention

 

Nominal value,
DKK billion

Share of total, per cent

Nominal value,
DKK billion

Share of total, per cent

7.00 per cent
bullet loans 2024

1.13

9.1

0

0

1.75 per cent
bullet loan 2025

2.07

16.7

0

0

0.50 per cent
bullet loan 2027

3.74

30.3

0

0

0.50 per cent
bullet loan 2029

2.75

22.3

0

0

0.00 per cent
bullet loan 2031

1.20

9.7

0

0

4.50 per cent
bullet loan 2039

1.43

11.6

0

0

Government bonds, total

12.3

99.8

0

0

Account balance

0.03

0.2

0.71

100

Total assets

12.3

 

0.71

 

Note:

The funds' ownership shares may not add up to totals due to rounding.

Source:

Danmarks Nationalbank.

Appended tables

Appendix table A1

Government debt at the end of 2013-2023 (continued next page)

DKK million

2013

2014

2015

2016

2017

A. Loans

 

 

 

 

 

Domestic loans

 

 

 

 

 

 

- bonds, nominally fixed rate

615,907

637,617

584,356

572,020

570,222

 

- bonds, inflation-linked

23,251

35,531

35,667

38,193

38,765

 

- fishery bank bonds

594

507

424

343

272

 

- T-bills

32,300

29,800

29,840

27,180

32,740

 

- currency swaps from DKK to EUR (net)

-1,490

-

-

-

-

 

- currency swaps from DKK to USD

-6,364

-5,215

-4,067

-2,942

-1,872

Total domestic debt

664,198

698,240

646,220

634,794

640,127

 

 

 

 

 

 

Foreign loans

 

 

 

 

 

 

- in USD

6,219

5,778

5,047

3,795

2,152

 

- in EUR

69,689

53,207

28,223

8,044

-

 

- in other currencies and multiple currencies

-

-

-

-

-

Total foreign debt

75,908

58,986

33,270

11,839

2,152

Total domestic and foreign debt

740,106

757,225

679,490

646,633

642,279

 

 

 

 

 

 

B.

Collateral for swaps

3,596

3,804

2,859

1,610

1,005

C.

Deposits in Danmarks Nationalbank

-161,953

-213,099

-157,376

-110,928

-134,689

D.

Danish Foundation for Prevention and Retention and Innovation Fund Denmark

 

 

 

 

 

 

- government securities

-62,550

-64,825

-62,399

-63,233

-52,084

 

- other securities

-32,352

-25,259

-17,172

-8,834

-7,432

Total for the two funds

-94,902

-90,084

-79,571

-72,067

-59,516

 

 

 

 

 

 

E.

Bonds for financing social housing

-

-

-

-

-

Total government debt (A+B+C+D+E)

486,848

457,846

445,402

465,249

449,079

Total government debt as percentage of GDP

25.2

23.1

21.9

22.1

20.5

Note:

Positive values indicate a liability, while negative values indicate an asset.

Source:

Danmarks Nationalbank.

Appendix table A1 (continued)

Government debt at the end of 2013-2023 (continued)

DKK million

2018

2019

2020

2021

2022

2023

A. Loans

 

 

 

 

 

 

Domestic loans

 

 

 

 

 

 

 

- bonds, nominally fixed rate

543,732

543,075

597,153

602,728

561,722

549,493

 

- bonds, inflation-linked

43,897

44,957

44,223

47,602

55,318

35,235

 

- fishery bank bonds

200

129

108

86

65

43

 

- T-bills

30,400

23,980

83,180

54,200

11,820

12,400

 

- currency swaps from DKK to EUR (net)

-

-

-

-

-

-

 

- currency swaps from DKK to USD

-1,022

-400

-67

-

-

-

Total domestic debt

617,207

611,741

724,596

704,616

628,925

597,170

 

 

 

 

 

 

 

Foreign loans3

 

 

 

 

 

 

 

- in USD

1,244

497

71

-

-

-

 

- in EUR

-

-

82,132

22,012

15,668

24,044

 

- in other currencies and multiple currencies

-

-

-

-

-

-

Total foreign debt

1,244

497

82,202

22,012

15,668

24,044

Total domestic and foreign debt

618,450

612,239

806,798

726,628

644,593

621,214

B.

Collateral for swaps

690

267

-370

573

279

517

C.

Deposits in Danmarks Nationalbank

-111,674

-70,411

-136,875

-151,533

-161,779

-160,461

D.

Danish Foundation for Prevention and Retention and Innovation Fund Denmark

 

 

 

 

 

 

 

- government securities

-48,454

-32,267

-25,851

-12,555

-12,665

-12,310

 

- other securities

-1,675

-1,675

-

-

-

-

Total for the two funds

-50,129

-33,942

-25,851

-12,555

-12,665

-12,310

 

 

 

 

 

 

 

E.

Bonds for financing social housing

-30,298

-86,784

-107,689

-124,960

-147,525

-154,707

Total government debt (A+B+C+D+E)

427,039

421,368

536,014

438,153

322,903

294,253

Total government debt as percentage of GDP

19

18.2

23.1

17.5

11.9

10.4

Appendix table A2

Government funding requirement 2021-23

DKK billion

2021

2022

2023

Operating, capital
expenditure and lending budget

33.1

186.12

NA.

On-lending etc.

−1.9

-7.5

NA.

Allocated issue tax losses
and interest payable

6.6

2.7

NA.

Other capital items

72.7

-52.5

NA.

 

 

 

 

Net cash balance

110.5

128.7

28.9

Net financing requirement
(= net cash balance)

-110.5

-128.7

-28.9

Repayment of long-term domestic government debt

148.3

143.2

113.6

Amortisation of T-bills

83.2

54.2

11.8

 

 

 

 

Domestic financing requirement

120.9

68.7

96.5

Repayment of long-term foreign government debt

0.1

12.6

0.0

Amortisations on commercial papers

69.5

9.4

4.5

Financing requirement

190.5

90.7

101.0

Source:

Central Government Accounts. 2023 is based on Danmarks Nationalbank's year-end statement, which may differ from accounting figures.

Appendix table A3

Interest payments on government debt 2016-23

DKK billion

2016

2017

2018

2019

2020

2021

2022

2023

Domestic debt

21.5

18.5

15.6

14.2

17.1

15.1

9.3

3.0

Foreign debt

0.1

0.0

-0.1

-0.1

-0.6

-0.4

-0.1

0.4

Central government's account at Danmarks Nationalbank

0.3

0.2

0.8

0.5

0.6

0.5

0.1

-4.8

Government funds

-4.1

-1.5

-1.2

-1.4

-0.9

-0.3

0.0

0.0

Bonds for financing social housing

0.0

0.0

-0.02

-0.03

0.1

0.2

0.1

-0.3

Government debt

17.8

17.1

15.1

13.2

16.3

15.1

9.4

-1.7

Government debt, percentage of GDP

0.8

0.8

0.7

0.6

0.7

0.6

0.33

-0.06

Government on-lending

-2.1

-2.0

-1.5

-1.4

-1.3

-1.1

-1.1

-1.6

Government debt, adjusted for on-lending

15.7

15.2

13.6

11.8

15.1

14.0

8.3

-3.3

Government debt, adjusted for on-lending, percentage of GDP

0.7

0.7

0.6

0.5

0.6

0.5

0.29

-0.12

Note:

A positive sign indicates an interest expense, while a negative sign indicates an interest income.

Source:

Central Government Accounts and Economic Report, December 2023. Figures for 2023 are preliminary figures from government accounting.

Appendix table A4

Central government domestic borrowing 2023

ISIN code

Nominal interest rate,
per cent.

Title

Opened

Last
pay date

Amount issued, nominal, DKK million

Amount issued, market value,
DKK million.

Government bonds

 

 

 

 

 

DK0009924292

0

Bullet loan
2024

5 May
2021

15 Nov 2024

3,525

3,350

DK0009923138

1.75

Outstanding loans
2025

23 May
2014

15 Nov 2025

21,520

20,944

DK0009924102

0

Bullet loan
2031

20 Jan
2021

15 Nov 2031

1,400

1,121

DK0009924532

2.25

Outstanding loans
2033

8 Feb
2023

15 Nov 2033

36,185

34,507

DK0009924615

2.25

Green bullet loan
2033

26 Sep 2023

15 Nov 2033

10,030

9,372

DK0009924458

0.1

DGBI
2034

14 Sep 2022

15 Nov 2034

4,710

4,904

DK0009924029

0.25

Outstanding loans
2052

1 Apr
2020

15 Nov 2052

2,035

1,040

Total government bonds

 

 

 

79,405

75,237

 

 

 

 

 

 

T-bills

 

 

 

 

 

DK0009818858

0

T-bill 2023 I

30 Aug 2022

1 Mar
2023

340

339

DK0009818932

0

T-bill 2023 II

29 Nov 2022

1 Jun
2023

11,820

11,756

DK0009819070

0

T-bill 2023 III

27 Feb 2023

1 Sep
2023

27,960

27,691

DK0009819153

0

T-bill 2023 IV

30 May 2023

1 Dec
2023

9,000

8,896

DK0009819237

0

T-bill 2024 I

30 Aug 2023

1 Mar
2024

11,260

11,091

DK0009819310

0

T-bill 2024 II

29 Nov 2023

3 Jun
2024

1,140

1,120

Total T-bills

 

 

 

61,520

60,894

Total domestic borrowing

 

 

 

140,925

136,131

Note:

Issues in connection with switches are included.

Source:

Danmarks Nationalbank.

Appendix table A5.1

Domestic government loans at year-end 2023

 

Outstanding
at year-end 2022

Issues 2023

Amortisation 2023

Outstanding
at year-end 2023

Last paydate

ISIN code

Fixed-rate government bond loans

 

 

 

 

 

 

Bullet loans

 

 

 

 

 

 

DGB 1.5% 15/11/2023

48,250

0

48,250

0

15 Nov 2023

DK0009923054

DGB 7% 10/11/2024

2,897

0

0

2,897

10 Nov 2024

DK0009918138

DGB 0.00% 15/11/2024

63,660

3,525

3,700

63,485

15 Nov 2024

DK0009924292

DGB 1.75% 15/11/2025

46,780

21,520

0

68,300

15 Nov 2025

DK0009923138

DGB 0.50% 15/11/2027

67,490

0

3,190

64,300

15 Nov 2027

DK0009923567

DGB 0.50% 15/11/2029

67,280

0

11,380

55,900

15 Nov 2029

DK0009923807

DGB 0.00% 15/11/2031

79,365

1,400

14,075

66,690

15 Nov 2031

DK0009924102

DGB 0.00% 15/11/2031 Green

16,240

0

0

16,240

15 Nov 2031

DK0009924375

DGB 2.25% 15/11/2033 Green

0

10,030

0

10,030

15 Nov 2033

DK0009924615

DGB 2.25% 15/11/2033

0

36,185

0

36,185

15 Nov 2033

DK0009924532

DGB 4.5% 15/11/2039

111,920

0

6,330

105,590

15 Nov 2039

DK0009922320

DGB 0.25% 15/11/2052

57,840

2,035

0

59,875

15 Nov 2052

DK0009924029

Inflation-indexed bullet loans

 

 

 

 

 

 

DGBI 0.1% 15/11/2023

25,844

0

24,135

0

15 Nov 2023

DK0009922916

DGBI 0.1% 15/11/2030

21,758

0

1,151

21,306

15 Nov 2030

DK0009923724

DGBI 0.1% 15/11/2034

0

5,235

0

13,937

15 Nov 2034

DK0009924458

Unamortisable

 

 

 

 

 

 

5 per cent Danish-Icelandic Fund 1918

1

0

0

1

-

-

Total fixed-rate government bond loans

609,324

79,930

112,210

584,736

 

 

 

 

 

 

 

 

 

T-bills

 

 

 

 

 

 

SKBV 01/03/2023 I

9,140

340

9,480

0

1 Mar 2023

DK0009818858

SKBV 01/06/2023 II

2,680

11,820

14,500

0

1 Jun 2023

DK0009818932

SKBV 01/09/2023 III

0

27,960

27,960

0

1 Sep 2023

DK0009819070

SKBV 01/12/2023 IV

0

9,000

9,000

0

1 Dec 2023

DK0009819153

SKBV 01/03/2024 I

0

11,260

0

11,260

1 Mar 2024

DK0009819237

SKBV 03/06/2024 II

0

1,140

0

1,140

3 Jun 2024

DK0009819310

Total T-bills

11,820

61,520

60,940

12,400

 

 

 

 

 

 

 

 

 

Fishery
bank bonds

 

 

 

 

 

 

5 per cent fishery bank bond 2025

65

0

22

43

1 Nov 2025

DK0009604894

Total fishery bank bonds

65

0

22

43

 

 

 

 

 

 

 

 

 

Total domestic government loans

 

 

 

 

 

 

Total domestic government securities

621,209

141,450

173,172

597,176

 

 

Swap from DKK to USD

0

0

0

0

 

 

Total domestic debt

621,209

141,450

173,172

597,176

 

 

Source:

Danmarks Nationalbank.

Appendix table A5.2

Foreign government loans at the end of 2023

 

 

Nominal interest rate, per cent.

ISIN code

Last pay date

Outstanding amount,
DKK million

Loans

 

 

 

 

 

2022/2024

Euro loans

2.5

XS2547290432

18 Nov 2024

11,139

2023/2025

Dollar loans

5

XS2717986876

14 Nov 2025

10,287

2023/2025

Swap from USD

 

 

 

-5,230

2023/2025

Swap from USD

 

 

 

-5,230

2023/2025

Swap to EUR

ESTR + 2.85bp

 

 

5,230

2023/2025

Swap to EUR

ESTR + 3bp

 

 

5,230

Total loans

 

 

 

 

21,296

 

 

 

 

 

 

Commercial papers

 

 

 

 

 

ECP programme2

 

 

 

 

0

- issues in EUR

 

 

 

 

0

- issues in USD

 

 

 

 

0

USCP programme in USD2

 

 

 

 

2,361

Currency forward contracts

 

 

 

 

43

Total CP outstanding

 

 

 

 

2,404

 

 

 

 

 

 

Total foreign debt

 

 

 

 

23,700

Note:

The outstanding amount as of 31 December 2023 has been converted to DKK using the following exchange rates as of 29 December 2023: EUR = 745.29 and USD 675,47.12.

Source:

Danmarks Nationalbank.

Appendix table A6

Government portfolio interest rate swaps, end 2023

 

DKK interest swaps

EUR interest swaps

Expiry year

Net exposure, DKK million

Net exposure, EUR million

Net exposure, DKK million

2024

-

300

2,236

2025

3,000

550

1,863

2026

300

650

-4,844

2027

1,650

925

6,894

2028

600

-

-

2029

1,750

-

-

2031

350

200

1,491

2032

-

650

4,844

2033

-

50

373

Interest rate
swaps in total

7,650

3.325

12,856

Note:

Net exposure is calculated as the difference in principal between interest rate swaps where the central government receives a fixed interest rate and interest rate swaps where the central government pays a fixed interest rate.

Source:

Danmarks Nationalbank.

Appendix table A7

On-lending and government guarantees administered by Danmarks Nationalbank 2018-23

DKK million

2018

2019

2020

2021

2022

2023

On-lending

 

 

 

 

 

 

A/S Femern Landanlæg

2,600

3,900

5,400

11,220

14,250

23,110

A/S Storebælt

17,040

17,271

18,286

18,219

17,948

17,178

A/S Øresund

10,322

10,722

10,772

11,122

12,022

12,872

Denmark’s Green Future Fund

-

-

-

130

454

651

Danmarks Skibskredit A/S

1,751

889

347

161

73

-

DR

3,044

2,902

2,801

2,801

2,599

2,609

Denmark's Export and Investment Fund

12,853

9,808

10,265

16,527

23,937

35,234

Energinet.dk

25,505

28,724

31,037

29,466

31,635

34,800

Evida Holding A/S

-

-

-

2,499

2,499

2,499

Femern Bælt A/S

6,200

11,750

11,750

7,180

7,180

7,180

Fjordforbindelsen Frederikssund

650

750

780

780

-

-

Hovedstadens Letbane I/S

350

1,100

1,300

1,900

2,300

4,900

Investment Fund for Developing Countries

-

142

188

264

426

812

Kalaallit Airports International A/S

-

-

-

249

634

784

Metroselskabet I/S

21,990

29,440

31,940

31,990

31,810

31,060

Naviair

-

-

-

500

500

500

Nordsøfonden (Danish national oil and gas company)

-

-

500

1,000

-

-

Sund & Bælt Holding A/S

300

650

650

650

300

500

Udviklingsselskabet By & Havn I/S

13,850

12,700

12,300

12,500

14,800

17,400

SAS

-

-

-

-

1,088

1,088

Total on-lending

116,455

130,748

138,316

149,158

164,455

193,178

 

 

 

 

 

 

 

Guarantees

 

 

 

 

 

 

A/S Femern Landanlæg

6

22

55

86

1,215

1,308

A/S Storebælt

3,955

2,285

1,023

828

1,166

877

A/S Øresund

447

439

465

528

804

808

DR (Danish Broadcasting Corporation)

436

436

436

436

436

436

DSB

1,687

749

286

245

205

164

Fjordforbindelsen Frederikssund

-

-

2

27

-

-

The Danish Guarantee Fund for Non-life Insurers

-

534

761

746

245

23

Sund og Bælt Holding A/S

-

-

-

-

-

-

Øresundsbro Konsortiet I/S

13,189

11,976

8,039

6,767

5,755

3,594

Total guarantees

19,720

16,442

11,068

9,664

9,826

7,210

Note:

Statement of guarantees includes guaranteed swaps. Loans based on index-linked bonds are recognised at nominal indexed value.

Appendix table A8

Government purchases and funds' net purchases of government bonds from the market in 2023

DKK million,
market value

The State

Fund for Better Working Environment and Labour Retention

Innovation Fund Denmark

Purchases from the market in total

Of which
in connection with switches

0.25 per cent bullet loans 2022

12,376

688

-2,258

10,806

426

1.5 per cent bullet loan 2023

13,391

-

-

13,391

1,220

0.1 per cent bullet loans 0.1 2023i

2,905

-

-

2,905

1,535

7 per cent bullet loan 2024

7,542

-

1,021

8,563

617

1.75 per cent bullet loan 2025

9,959

-

-

9,959

768

0.5 per cent bullet loan 2027

1,125

-

-

1,125

1,125

0.5 per cent bullet loan 2029

3,550

-

-

3,550

1,390

0.1 per cent bullet loans 2030i

11,285

-

962

12,247

6,637

Total

62,133

688

-276

62,546

13,717

Source:

Danmarks Nationalbank.