The performance of the stock market and the bond market are closely linked, and low interest rates typically lead to higher activity in the stock market at the expense of trading in fixed-income securities. However despite record-low interest rates throughout 2003, the bond market saw average daily trading volumes of NOK 10 billion including repurchase ("repo") agreements (NOK 3.8 billion excluding repos). Total turnover including repos showed a sizeable 44% increase from 2002. One major reason for this increase was the introduction by Norges Bank of a new primary dealer arrangement for treasury bills in August 2003. The primary dealer arrangement means that investment firms now make prices in treasury bills whereas this was previously carried out by Norges Bank.
If repos are excluded from the figures, turnover in 2003 was up by 26% from 2002. The highest levels of activity were seen in March and June, which were the months with greatest interest rate volatility.
The number of new issues in the bond market in 2003 was 6% higher than in 2002, with a total of 161 new issues made up of 124 bond issues and 37 certificate issues. In terms of total value this amounted to NOK 193.6 billion, down by just 3% from the new issue record set in 2002. Norwegian municipal and county authorities, as well as foreign issuers, were more active in the new issue market in 2003. Municipal and county authorities raised 149% more from the bond market in 2003 than in 2002. The Norwegian State and the banking sector continued to be the two largest sectors of the market.
A further positive trend in 2003 was a steady increase in the number of issuers electing to list their certificate issues. This related principally to companies that already have listed bond issues. The main difference between bonds and certificates lies in the maturity period. Certificates are always issued for periods less than 12 months, while most bonds are issued with maturities between 2 and 10 years.
