Norway: Norges Bank could act today

Norges Bank could announce extraordinary liquidity measures already later today or during the next few days, according to analysts at Nordea. EUR/NOK is trading at 11.196 after surging in the last hours. 

Key quotes

“Financial markets are changing by the hour. Liquidity in the Norwegian short end is collapsing. The premium in EURNOK FX swaps is up 40 bp from yesterday and Nibor-OIS (the money market premium) could widen to 100 bp today.”

“To prevent a total meltdown, Norges Bank will have to add term liquidity very soon, thus acting before the monetary policy meeting next Thursday.” 

“3-month F-loans would do the trick as banks have plenty of collateral. Such measures could be announced already later today or during the next few days.” 

“The liquidity measures could be a stand-alone announcement, but they could also announce the expected rate cut at the same time."