Norway’s oil fund is “more unclear” on how Europe’s revamped bailout facility will work as the region plans to present its leveraged rescue fund next month in the hope of attracting investors.
“We are waiting for more information,” Trond Grande, the deputy chief executive officer of the nation’s $560 billion sovereign wealth fund, said in an interview in Oslo. “It’s more unclear for us how that construction would be.” He declined to comment on whether the fund bought bonds in yesterday’s 3 billion-euro ($4.1 billion) note sale by the European Financial Stability Facility.
The Norwegian fund participated in the EFSF’s first sale of debt in January, saying at the time it was “positive to this initiative.” International Monetary Fund Managing Director Christine Lagarde said today in Moscow that the guidelines for Europe’s rescue fund are “not yet sufficiently defined for many investors” and that the IMF welcomes the European Union’s plan to accelerate the publication of parameters for the EFSF.
The facility yesterday revived a sale of 10-year debt it pulled last week even as the region’s debt crisis deepened. The fund priced the bonds due February 2022 at 104 basis points more than the benchmark swap rate, according data compiled by Bloomberg. In June, the facility priced similar maturity debt at 17 basis points, or 0.17 percentage point, more than swaps. Investors demand wider yield spreads to be compensated for risk.
The yield on the EFSF bond issued in June, which matures in 2021, rose 2 basis points to 3.42 percent as of 4:43 p.m. Frankfurt time.
The EFSF postponed the bond sale on Nov. 2 amid turmoil prompted by Greek Prime Minister George Papandreou’s call for a referendum on the rescue accord for his country. Papandreou has since agreed to step down in favor of a unity government, while concerns about Italy’s creditworthiness sent its yields to records.
European officials are consulting investors and credit-rating companies over options for translating the rescue fund’s 440 billion euros in guarantees into as much as trillion euros of spending power.
The EFSF, which was established in June 2010, raised 13 billion euros from three bond issues this year. Yesterday’s deal attracted more than 3 billion euros of orders and met with “solid demand,” the EFSF said in a statement. That compares with orders of more than 8 billion euros for its 5 billion-euro issue of bonds due in 2021 sold in June, according to the EFSF. The fund got 44.5 billion euros of orders for the first sale on Jan. 25, when it raised 5 billion euros.
Norway’s oil fund got its first capital infusion in 1996 and has been taking on more risk as it expands globally, raising its stock portfolio to 60 percent from 40 percent in 2007. It first added stocks in 1998, emerging markets in 2000 and this year real estate to boost returns and safeguard wealth.
Norway, a nation of 4.9 million people, generates money for the fund from taxes on oil and gas, ownership of petroleum fields and dividends from its 67 percent stake in Statoil ASA, the country’s largest energy company. Norway is the world’s second-largest gas exporter and the seventh-biggest oil exporter. The fund invests outside Norway to avoid stoking domestic inflation.