The Norwegian finance ministry announced guidelines for the government bond fund, the launch of which, together with a government finance fund, was announced on Feb. 8.
The bond fund is intended to support the funding of banks and companies which was traditionally done through the capital market, while the financing fund is for the preventive capitalization of Norwegian banks. A sum of NOK50 billion ($7.74 billion) has been made available for each fund.
The bond fund will be able to invest 25% 65% of its assets in issues of banks and financial institutions and 35% to 75% in issues of non-financial institutions. Covered bonds of domestic banks qualify in principle as investment instruments for the fund. It should also be possible to invest in bonds denominated not only in NOK but also in , US$ and £.
Up to now the Norwegian government has used covered bonds among others within the framework of its state support programme to procure liquidity for domestic banks, said Dresdner Kleinwort analysts. A repo facility was made available for this bond class, whereby banks could obtain government bonds in exchange for covered bonds, which boosted the growth of the domestic covered bond market.