In 2017, the Republic of Finland issued two new euro-denominated benchmark bonds and a new 30-year serial bond. In addition, four tap auctions were conducted with one being a twin-line tap. Short-term funding was carried out via the Treasury bill programme.
The first euro issue of the year was a dual-tranche syndication in mid-February. The maturities of the bonds were five and 30 years. The five-year issue was of benchmark size at EUR 3 billion, with an order book of EUR 6.9 billion and 55 investors participating in the deal. The serial bond with the 30-year maturity raised EUR 1.5 billion. The order book grew to EUR 5.5 billion with 78 investors in the final allocation.
The second syndicated issue of the year was a ten-year euro benchmark bond launched on 30 August. This was in accordance with the strategy of issuing two new euro benchmark bonds annually. The issue size was EUR 3 billion. More than 90 investors participated in the transaction, with the order book growing to approximately EUR 11 billion.
In addition to the new lines, outstanding euro benchmarks were tapped in four auctions during the year. The total auctioned volume amounted to EUR 4.5 billion for the year.
The first auction of the year was conducted in late March. The auctioned bond was a benchmark bond maturing in September 2023. The total outstanding stock was raised by EUR 1 billion to EUR 5 billion in total.
The second auction on 26 April was a twin-line tap composed of the new five-year euro benchmark bond due 15 April 2022 and the new 30-year serial bond due 15 April 2047. The outstanding amount of the 2022 bond grew by EUR 1 billon to EUR 4 billion in total. The bond maturing in 2047 grew by EUR 500 million, bringing the total outstanding amount to EUR 2 billion after the auction.
The last two auctions of the year took place in the last quarter. On 10 October the five-year benchmark bond maturing on April 2022 was tapped again successfully with the total issued amount growing by EUR 1 billion to EUR 5 billion. The final auction of the year was conducted in November for the new ten-year benchmark bond. The outstanding amount of the bond increased by EUR 995 million reaching a total amount of EUR 3 995 million. The bid-to-cover ratio was 1.43.
Issuance in different currencies
Following its established funding strategy, the Republic of Finland launched a new USD-denominated bond in September. The three-year bond issued under the EMTN programme amounted to USD 1 billion and was sold to more than 60 different investors. In addition to the three-year USD bond, a two-year floating rate note was issued in the first half of the year. The nominal amount for this was USD 1 billion. The issues were hedged for currency risk.
The issuance in foreign currency bonds complements the euro-denominated borrowing and makes participation possible also for investors who do not invest in euro-denominated bonds.
The short-term funding vehicle for the Republic of Finland is the Treasury bill programme. The programme is similar to European Commercial Paper programmes, and the T-bills are issued in daily tapping windows during the year, the timing of the issuance depending on the liquidity position of the central government. Finland does not have regularly announced auctions of T-bills. Treasury bills are issued in two currencies: euros and US dollars.
In 2017, the vast majority of the Treasury bill issuance was USD-denominated. The issuance window was open during four time periods: in April, late June, October and November. The average maturity of the T-bills was 5.5 months (3.7 months in 2016), and the gross volume of the Treasury bill issuance was USD 11.25 billion and EUR 215 million. The outstanding stock at year end was USD 8.05 billion and EUR 125 million.
The liquidity position of the central government remained strong during the year.
The amount of cash reserves is based on an assessment of sufficient liquidity and a limit on uncovered net cash flow. The flexibility the ECP-format in Treasury bill issuance offers in the short-term funding is helpful in optimising the cash position.
The cash reserves are invested in the short-term maturities. To avoid credit risk, the investments are mainly carried out in the form of triparty repo agreements.
Liquidity management relies strongly on the cash flow forecast system. All government accounting entities forecast their income and expenditures for the next 12-month period into the system. The State Treasury is using this data as a basis for liquidity management decisions.