Euro debt crisis and the US- created uncertainty push investors to Norway


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Wednesday, 03 August 2011
The debt crisis in the EU and the U.S. are creating a powerful force for investors to seek Norway as a new safe heaven to keep their money.

As such, investors are pouring money into the Norwegian government bonds, the Norwegian business daily Dagens N�ringsliv reports. It has led the Norwegian government bond yields in recent days has fallen to historically low levels.

“Norwegian government bonds are extremely popular and government interest rates have fallen like a stone,” said Chief Economist Steinar Juel at Nordea to the paper.

Norway is the world champion in credit according to P�l Ringholm, head of credit analysis at First Securities, Norway, who also believes that there is a flight to safety that has made the Norwegian government bond yields to plunge.

“What we have seen lately is a massive reallocation of funds in which investors seek safe havens. Norway is the world champions in the credit and is the country in the world where market participants are pricing the least risk of default on government debt,” said Ringholm.

According to currency analyst Camilla Viland of the bank, DnB NOR, the markets dropped the interest rate on Norwegian government bonds with a maturity of ten years from about 2.8 percent on Monday, to 2.63 percent yesterday.

“This is a very big change in one day and the interest according to the current observations at record low,” says Viland.

Also the Norwegian currency the krone has appreciated sharply in value in recent days. On Tuesday the currency traded at around Nkr7.65 against the euro, the strongest level since autumn 2007.

“Historically, the Krone is not the safe haven currency, but with the debt crisis in the EU and the U.S., this may make the currency appear more attractive, says Viland and also points to the strong Norwegian state finances
By Team

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