Money market rates have fallen swiftly after Norway’s central bank offered short-term liquidity to banks. Rates remain above those of last week, when they rose following slower-than-normal flows between banks. Tax payments are apparently to blame, reports Reuters:
Norges Bank promised two liquidity loans, called F-loans, in a move designed to reassure markets and which quickly brought down money market rates. The central bank also held out prospects for further loans…
One of the loans Norges Bank offered on Monday was a loan for Jul. 5-8. It also offered a loan for Jul. 15-Aug. 12 and said more would be on offer during the same period… Analysts said the Norwegian central bank issued the F-loans as it did not like the jump in rates.
Norges Bank said the liquidity for Jul. 15-Aug. 12 was offered to counteract a drain on cash flows due to tax payments. “The liquidity is getting rather tight in mid-July due to ordinary tax payments and that we will also feed into early August when we have the oil tax payments,” [Anders] Svor said.