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• US TSY 26W BILL AUCTION: BID/CVR 3.00

• US TSY 13W BILL AUCTION: HIGH 3.860%(ALLOT 70.07%)
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• US TSY 13W BILL AUCTION: BID/CVR 2.74

With the Riksbank's SEK40bln minimum deposit requirement set to apply from the end of October, the central bank has announced that the offered volume of Riksbank Certificates will decline by a commensurate amount from the issue with a tender date of October 14 (see here). While we consider this a largely operational decision given the introduction of minimum reserves has been well-signalled since June, some contacts have noted that it may relieve some pressure in funding markets relative to the counterfactual of no reduction in Riksbank Certificate volumes. 

• Riksbank Certificates are short-maturity (usually 7-day) securities issued to mop up excess liquidity in the Swedish banking system. "At each time of issue, the Riksbank normally offers a volume of certificates that corresponds to the banking system’s lowest projected liquidity surplus during the maturity of the certificate"
• Certificates pay interest equal to the current policy rate, and make up the majority (almost 80%) of the SEK640bln liquidity surplus in the system. The remainder of banking system liquidity is held in overnight reserves in the deposit facility, renumerated at 10bps below the policy rate.
• By the Riksbank's own admission (e.g. Governor Thedeen’s recent interview with the MNI Policy Team), too much demand for Riksbank Certificates can lead to volatility in money markets as there is a shortage of reserves on a given day. As such, there may be less pressure in funding markets if the minimum deposit requirement is absorbed by lower Certificate volumes rather than lower deposit facility reserves.
• A reminder that Riksbank Governor Thedeen's aforementioned speech noted that the bank is considering widening the interest rate corridor (i.e. lowering the deposit facility rate relatively to the policy rate) in order to stimulate more activity in the interbank market. If take-up of Riksbank Certificates increases under this scenario, the Riksbank hopes that more banks will be comfortably using the central bank's liquidity facilities where required, without stigma.
• Minimum deposits will be held in special non-interest bearing accounts at the Riksbank. "As deposits to these accounts can be made as early as 15 October, there is some uncertainty about the size of the liquidity surplus in the period 15-31 October. When deposits are made, the liquidity surplus is reduced by a corresponding amount”. Overall, the SEK40bln deposit requirement is still relatively small when compared with the overall liquidity surplus.