Norway said its asset sales will help lower borrowing needs and ease yields on the debt of western Europe’s biggest oil exporter.
Norway will probably place the 7.8 billion kroner ($1.2billion) it has raised selling shares in Cermaq ASA and listing Entra ASA in an “excess liquidity” account at the central bank, according to the Trade and Industry Ministry.
“A sale of shares in government-owned companies will see an offset in the form of lower borrowing or increased cash holdings,” Trond Viken, a ministry spokesman, said in an email. “Lower net borrowing needs in isolation could lead to lower interest rates on government debt.”
Norway’s Conservative-led government came to power last year promising to reduce the state’s role in the $500 billion economy. So far it has sold its entire 59% stake in salmon farmer Cermaq and cut its holding in real estate company Entra in an initial public offering. The government also flagged that it will seek to sell shares in telecommunications operator Telenor ASA among others.
A reduction in its ownership in Telenor to 34% from 54% could alone raise about 40 billion kroner, said Gaute Langeland, chief analyst in Oslo at Nordea Bank AB.
Langeland said it’s not entirely clear how the government will manage the proceeds and how it will affect bond issuance.
There’s a lot of “excess liquidity” in the banking system and “that could argue for the government to withdraw some liquidity,” he said. “One way of doing that is to either issue more government bonds or to sell some other assets. It could very well be that the impact on issuance is not as large as it could seem at first sight.”
The fiscal budget for next year implies funding need of about 60 billion kroner, Nordea’s Langeland said. Total issuance for this year will be around 66 billion kroner, he said.
Excessive liquidity caused the government to cut expected sales by 11 percent to 62 billion kroner this time last year.
The proceeds from the share sales will probably not be used to lower issuance, said Magne Oestnor, an analyst at DNB ASA.
“The reason Norway issues government debt is not because there is any need for the money.” The government issues bonds because it needs “a liquid market where they can set reference rates with different maturity,” he said. “I don’t think this will affect issuance.”
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