In 2014 the amount of krone liquidity in the Danish money market was reduced among other things as a result of large payments to the government in connection with capital pension taxation. In 2015 the liquidity is expected to decrease further partly due to payments of pension-yield tax (PAL) to the government.
With the current amount of krone liquidity, the monetary-policy deposit rate determines the Danish money market rates since the monetary-policy counterparties have a large need to place funds at Danmarks Nationalbank. When the amount of krone liquidity is further reduced, the usual temporary fluctuations in government payments may periodically reduce the liquidity to such an extent that the money market rates may rise. This may affect the krone exchange rate.
If the need arises, Danmarks Nationalbank will support the fixed-exchange rate policy by adding krone liquidity to the Danish money markets for shorter periods via liquidity-adjusting operations. Liquidity-adjusting operations are temporary allocations of kroner either as lending against pledging of assets included in Danmarks Nationalbank's collateral basis or via FX swaps.
Terms and conditions of the operations, including instrument, maturity, and procedure, will be announced when the operations are conducted at www.nationalbanken.dk -> Market info -> Market operations -> Liquidity adjusting instruments.
Enquiries can be directed to Karsten Biltoft on tel. +45 3363 6021.