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• Danske Bank note that the market impact is tricky to gauge “since the final set-up of the certificate program has yet to be decided”.
• However, their current base case is for a “NOK 50bn program with weekly auctions which, given the current level of structural liquidity, is likely to return FRA/Nowa back to the mid-20s (our model estimates)”. Current NOK FRA/OIS spreads are around 15-17bps.
• They think that “the very short-dated treasury bills and NGBs are also likely to cheapen”.
• They caveat that while “a new asset class does make NOK FX more investable for foreign investors looking for low duration placement opportunities"...."we think much more important drivers are at play in determining the direction of NOK FX and hence we want to downplay the FX spot impact of this announcement”.

On Friday evening, Norges Bank announced the introduction of Central bank certificates as a new instrument to mop up excess liquidity. Following a consultation with relevant participants, the bank aims to start issuing certificates during 2026. Existing liquidity operations under the quota system (F-loans, F-deposits) will remain in place. See the consultation letter (in Norwegian) here.

• A reminder that Norges Bank aims to maintain total liquidity (i.e. central bank reserves) between NOK30-4bln. Structural liquidity is much higher than this level, so Norges Bank provides F-deposits to drain excess liquidity and ensure the target range is met.
• Structural liquidity in the Norwegian banking system has increased in recent years because “government debt borrowing over time has been lower than transferred dividends from Norges Bank and the government's actual borrowing requirements”. As of this year, the Government also stopped sterilising increases in Norges Bank FX reserves with issuance (meaning Norges Bank now purchases NOK FX in daily operations to prevent unwanted rises in central bank reserves).
• Norges Bank writes that “The effects of high structural liquidity have been evident in the Norwegian money market in recent years...Money market spreads have reached very low levels as structural liquidity has increased…At the same time, turnover in the interbank market has fallen….Both of these trends indicate that banks have less need to insure themselves against liquidity risk and that they are redistributing liquidity among themselves in the money market to a lesser extent”.
• “Central bank certificates will be used to draw down central bank reserves over longer periods. The certificates will be made available for purchase by both banks and other non-bank investors (the public)“.

Figure 1: NOK Scarcity Premium and Structural Liquidity Over Time (Source: Norges Bank)

Figure 1: Norges Bank Liquidity Forecasts (Source: Norges Bank)

• RES 4: 0.6726 1.236 proj of the Jun 23 - Jul 24 - Aug 21 price swing
• RES 3: 0.6660/6707 High Sep 18 / 17 and a bull trigger
• RES 2: 0.6629 High Sep 30 & Oct 01 and key short-term resistance
• RES 1: 0.6560 50-day EMA
• PRICE: 0.6513 @ 08:11 BST Oct 13
• SUP 1: 0.6473 Low Oct 10
• SUP 2: 0.6463 Low Aug 27 
• SUP 3: 0.6415 Low Aug 21 / 22 and a bear trigger 
• SUP 4: 0.6373 Low Jun 23

A sharp sell-off in AUDUSD on Friday resulted in a break of 0.6521, the Sep 26 low, and 0.6484, the 76.4% retracement of the Aug 21 - Sep 17 bull leg. This undermines the recent bullish theme and instead signals scope for a deeper retracement, potentially towards key support at 0.6415, the Aug 21 and 22 low. Initial resistance to watch is 0.6560, the 50-day EMA. Key short-term resistance has been defined at 0.6629, the Sep 30 and Oct 1 high.