Norges Bank Reports Challenges in the Money Market – E24

The case is being updated …

Norges Bank claims that in recent weeks there has been a skewed distribution in the market where banks borrow money from each other, the so-called interbank market.

– There has been considerable uncertainty about the supply of crowns as a result of this, Norges Bank writes in a press release.

Moving forward, the central bank will consider measures that strengthen incentives for redistribution among banks. It also emphasizes that a well-functioning interbank market is the basis for the implementation of monetary policy.

– I do not fully understand this press release from Norges Bank. “I can’t see what market implications this has had,” says Magne Østnor, crown strategist at DNB Markets at E24.

– Norges Bank wants liquidity to be distributed among banks so they can borrow from each other. It seems that it has not happened to the extent that they want, he says.

Østnor emphasizes that it is about liquidity in the banking system.

– It may have affected the money market rate in the sense that it will be somewhat higher than it would have been otherwise.

But add:

– When I look at the evolution of money market interest rates, I do not see that it has been the case.

Since Friday morning, the krone has weakened significantly against the euro, the dollar, and the British pound.

One euro now costs 11.17 kronor, a decline of around 11 øre since midnight. At the same time, one dollar is at 9.60 crowns, an increase of 12 crowns from midnight.

Tar grip

To improve the situation, the central bank has decided to implement measures already on Friday.

– To ensure that banks access NOK at an interest rate close to the key interest rate, Norges Bank will offer F loans with a full allocation at a fixed interest rate with a maturity of one day, the central bank writes.

These F loans are operated by Norges Bank which auctions fixed rate loans to banks in exchange for some form of collateral.

In this way, banks access loans without having to obtain them from other banks in a highly pressured market.

The central bank will offer these loans whenever the situation on the interbank market indicates that it is necessary. The first offer of such F loans will be made on Friday afternoon.

The F loans now being offered will be in addition to previously announced market operations and market operations as a result of structural liquidity forecasts.