Auction procedure

The Debt Office strives to have a transparent and clear procedure for the issuance of government securities. In the report Central Government Borrowing – Forecast and Analysis, which is published two times per year, we present our plans for future auctions. The terms of each auction are published a week in advance.

Prior to each auction, the maturity is set for the securities being issued. This decision is based on an internal, more detailed issuance plan. Primary dealers and investors can provide their opinions before decisions are finalised, but we normally follow the internal issuance plan.

The Debt Office can also use the auction format for switches and buybacks of bonds.

Bids in the form of yield are submitted electronically

Bids in the auctions are expressed as yield and are submitted electronically via the Bloomberg auction system. Only the Debt Office’s authorised primary dealers are allowed to submit bids.

Allotment differs per debt type

Once an auction closes, the bids are ranked from the lowest to highest bid rate (yield). The bid with the lowest yield is accepted first, followed by the bid with the next-lowest yield and so forth until the desired volume is reached. The Debt Office normally accepts enough bids to ensure that the volume issued in the auction is that which was announced. To ensure that the allotted volume does not exceed the volume we intend to sell, bids that are marginally close to the highest accepted yield are reduced in terms of percentage.

Primary dealers and investors intent on purchasing government securities issued by the Debt Office bid in line with or below market interest rates. If demand is strong, competition may lead to a slightly lower yield level in the auction – and vice versa.

The allotted yield differs by the type of debt instrument:

Nominal bonds and treasury bills

The allotted yield is determined using the multiple-price method. This means that the bidders offering the highest price – i.e. the lowest yield – are allotted securities at the yield that they bid. Bidders receiving allotment thereby pay the prices they offered.

Inflation-linked bonds

The allotted yield is determined using the single-price method. This means that allotment is based on the highest accepted yield, even if one or several winning bidders have placed bids at lower rates. All buyers thereby pay the same price.

The results are published once the auction is closed

The results of an auction are published here on the website around 11:03 CET on the auction day. In the case of switch auctions, the results may be published a little later.

No obligation to issue the entire volume

The Debt Office is under no obligation to issue the entire advertised volume in any given situation. This means that we can reject bids that are deemed to be unnecessarily expensive. This may happen if a bid deviates from what can be considered justified based on the market.

We have no absolute rules for when a bid is rejected. On a volatile and uncertain market, we may accept greater deviations from indicative market prices. In the case of a large variation of bids on an otherwise stable market, and also in the case of few bids, there may be cause to be more restrictive.

No obligation to issue loans at indicative interest rates

There may be situations in which interest rates indicated by market participants cannot be used as the basis of accepting bids during auctions. If the indicative interest rates have been produced in a manner that is deemed unreasonable in relation to other markets and to fundamental economic trends, we reserve the right to set the yield unilaterally. It should be emphasised that this only relates to exceptional cases, for example if there is a suspicion of market manipulation or if indicative interest rates are not based on any actual market activities.