30 December 2020

Announcement concerning Central Bank purchases of Treasury bonds

At the beginning of May 2020, the Central Bank of Iceland began buying Treasury bonds in the secondary market, in accordance with the 23 March 2020 statement by the Monetary Policy Committee. According to that decision, the total amount purchased may range up to 150 b.kr. The Bank will announce the maximum bond purchase amount for each quarter in advance.

For Q1/2021, the Bank’s total purchases may range up to 20 b.kr. at market value. The Bank may buy bonds in all nominal benchmark series denominated in Icelandic krónur.

The Central Bank will purchase the bonds by submitting bids to the Nasdaq Iceland trading system. It is also possible that the Bank will announce purchases by auction.

Any auctions that are held will be announced with one day’s advance notice. The announcement will specify the series and the estimated maximum amount to be purchased.

Information on the general terms and conditions for auctions that may be held in connection with the Central Bank’s purchase of Treasury bonds in the secondary market can be found here.

The aim is to keep the scale of the purchases consistent with normal market functioning. The Bank will set amounts, frequency, and execution of the purchases so as to ensure the efficacy of the measures.

For Q2, Q3, and Q4/2020, it was announced that the Bank’s total purchases could range up to 20 b.kr. market value for each of the three quarters.* The Bank’s total purchases in Q2 came to 0.9 b.kr. market value, as follows: RIKB21, 0.2 b.kr.; and RIKB22, 0.7 b.kr. No purchases were made in Q3. The Bank’s total purchases in Q4 came to 6.7 b.kr. market value, as follows: RIKB25, 1.0 b.kr.; RIKB28, 2.7 b.kr.; and RIKB31, 3.0 b.kr.

A more detailed breakdown of the Bank’s bond purchases can be found here.

Further information can be obtained from Sturla Pálsson, Director of the Markets Department of the Central Bank, at tel +354 569-9600.

* The sale price or market value refers to the clean price plus accrued indexation; i.e., with indexation but without accrued interest.

Press release no. 45/2020
30 December 2020