Liquidity and Supply in the Norwegian Government Bond Market

Abstract

The Norwegian government issues debt in the bond and bill market. Market prices for these instruments contain information about market expectations concerning the required real rate of return and inflation. The quality of the information depends in part on the efficiency of price formation. This article describes the structure of the Norwegian government bond market and liquidity in the market. The article also considers the impact of supply and demand on price formation in the government bond market. Compared with other government bond markets, liquidity in the Norwegian market is considered to be relatively limited, and there are signs of a scarcity premium in price formation.