Two Treasury bond series are scheduled to mature before 2013: RIKB12, which matures in August 2012, and RIKB13, maturing in May 2013. The majority of these bonds are owned by non-residents, who held over 69% of outstanding RIKB12 bonds (including loaned securities) and 78% of RIKB13 bonds as of end-April. Non-residents are also by far the largest owners of Treasury bills, and even though they bought no bills at all in the April auction, they owned over 69% of the outstanding stock at the end of the month.

Non-residents starting to buy RIKB14
According to GDM's monthly Market Information newsletter, published earlier this week, non-residents have begun to show interest in the two-year RIKB14 Treasury bonds. In the first auction of RIKB14, which took place in March, GDM sold a total of ISK 5.2 bn in the series, but non-residents bought none. This took us somewhat by surprise, as the duration is short and non-residents have generally been quite interested in short maturities. As we have reported previously, the slow response may be due to the length of time until the maturity of RIKB12, which is owned predominantly by foreign investors. But interest seems to have picked up in April. Non-residents bought RIKB14 in the amount of ISK 0.7 bn, or one-fourth of the sold volume in an auction that was much smaller in scale than its predecessor. It appears as though they bought some additional bonds in the aftermarket as well, as non-residents' holdings in the series totalled just over ISK 0.82 bn, or 10% of the total outstanding stock, at the end of April.

Almost half of planned 2012 issuance already sold
In the first four months of the year, new Treasury bonds were sold for ISK 33 bn nominal value, or 44% of planned issuance for the year. Over half of those bonds, or ISK 17 bn, were sold through CBI foreign currency auctions, while the other ISK 16 bn were sold in conventional auctions. So far in May, no bonds have been sold in general auctions, although about ISK 3 bn worth of RIKS33 bonds were sold in last Wednesday's foreign currency auction. In all, then, GDM has sold bonds for ISK 36 bn year-to-date, or about 48% of planned issuance, including ISK 20 bn in connection with FX auctions. The latter is equivalent to about 56% of the volume sold so far this year. Most likely, more bonds will be sold in conventional auctions for the remainder of the year, as it is quite uncertain how interested the pension funds will be in the next FX auction, scheduled for 20 June. The CBI has not scheduled any further currency auctions as yet. It is well known that the pension funds have been by far the largest buyers of indexed Treasury bonds in the FX auctions, with about 91% of sold volume. In all, issuance of indexed RIKS bonds in connection with the foreign currency auctions totals just over ISK 34 bn.