Liquidity in the Norwegian bond and certificate market in the first half of 2020

Abstract

The coronavirus outbreak and the pandemic that followed contributed to considerable volatility in Norwegian financial markets in March 2020. For a period, liquidity in the Norwegian bond and certificate market deteriorated markedly. According to Norges Bank’s market liquidity survey for the first half of 2020 and information from market participants, an imbalance arose between buyers and sellers which was amplified by higher margin requirements in FX swaps. Market data confirms that this had a significant impact on bid and ask prices. The gradual reopening of society and measures introduced by Norges Bank in March, in the form of extraordinary F-loans and changes in collateral requirements for loans, contributed to improving market conditions in the period to summer.