Government Securities: Primary Issuance

This Handbook discusses different possible approaches to the primary issuance of government debt, that is to say, the point at which the debt - normally in securitised, or tradable, form - is first sold by the government to the non-state sector. The main focus of the Handbook is on auctions of tradable debt, in part because this is the means predominantly used by developed, developing and transitional countries which issue debt to the non-state sector to finance the government’s deficit. But it also covers other means of selling tradable debt, and some aspects of non-tradable debt. The Handbook considers some of the key factors affecting uncertainty and demand in the primary market. In general there will be a cost to uncertainty (where investors are unsure about a number of aspects of the debt issuance programme), and to exclusivity (where access to part or all of the primary market is restricted in some way). But uncertainty may be the counterpart to a measure of flexibility, and exclusivity the counterpart to manageability. Debt managers need to decide where, in view of the structure and state of development of their markets, to make the trade-offs. The Handbook also discusses a number of practical operational issues. An Appendix describes in detail some of the features of index-linked securities. An earlier Handbook (No.5 The management of government debt, see Related Links) discussed the relative merits of fixed and floating interest securities, but covered indexed securities only briefly. This handbook is also available in Russian and Spanish.