On 17 April 2012, the Central Bank of Iceland offered to purchase euros in exchange for Icelandic krónur for long-term investment in the Icelandic economy, or in exchange for payment in Treasury bond series RIKS 33 0321. The Bank also advertised for bids on the sale of Icelandic krónur for cash payment in foreign currency. The two euro purchase auctions took place between 9:45 hrs. and 10:45 hrs. today., and the króna purchase auction took place between 13:00 hrs. and 14:00 hrs. The auctions were an element in the removal of restrictions on movement of capital as set forth in the Central Bank’s capital account liberalisation strategy, published on 25 March 2011. Further information can be found in the Central Bank of Iceland Terms of foreign exchange transactions according to the Investment Programme for capital account liberalisation, with subsequent amendments, dated 18 November 2011.
Results of EUR purchase auction
In all, 66 bids totalling 61,3 million euros were submitted, and bids in the amount of 38,6 million euros were accepted. The auction was structured with a single-price format, so that all accepted offers were made available to primary dealers at the same price, which was set at 238,8 kr. per euro.
| Highlights | Total | Treasury bonds | Investment Programme |
|---|---|---|---|
Number of bids | 66 | 33 | 33 |
Total amount in EUR | 61.3 m | 35.6 m | 25.7 m |
Accepted bids in EUR | 38.6 m | 12.9 m | 25.7 m |
Investors selling foreign currency according to the Treasury bond option will receive indexed RIKS 33 0321 bonds as payment. Bonds sold in the series totalled 3.0 b.kr. nominal value.
As payment for foreign currency sold, investors participating in the Investment Programme will receive Icelandic krónur for long-term investment in the Icelandic economy. Euros purchased in the auction totalled the equivalent of 6.1 b.kr.
Results of ISK purchase auction
The auction was structured with a single-price format, so that all accepted offers were made available to primary dealers at the same price, which was set at 239 kr. per euro. In all, bids were submitted in the amount of 25.3 b.kr., and bids totalling 9.1 b.kr. were accepted.
| Highlights | Total |
|---|---|
Number of bids | 39 |
Total amount in b.kr. | 25.3 |
Accepted bids in b.kr. | 9.1 |
Summarised results of Treasury bond and Investment Programme auctions
The following table shows the summarised results of the three foreign currency auctions held so far this year, in February, March, and May.
| Highlights | Total | Treasury bonds | Investment Programme |
|---|---|---|---|
Number of bids | 222 | 127 | 95 |
Total amount in EUR | 327.8 m | 221.0 m | 106.8 m |
Accepted bids in EUR | 202.4 m | 96.9 m | 105.5 m |
Treasury bond purchasers were predominantly pension funds (91%) and other investors (9%). Underlying investments in connection with the Investment Programme are as follows: equity securities, 60%; bonds,29%, real estate, 10% and mutual funds, 1%. Participation in the Investment Programme for offshore krónur has been extremely limited. In most instances, investments in real estate are small and are carried out by Icelandic individuals who are domiciled abroad and/or are considering moving back to Iceland. The largest investors in bonds and equities are foreign parent companies of domestic firms. In addition, some non-residents are investing in newly established companies. Total investments based on participation in the investment Programme amount to 211 million euros.
Further information can be obtained from Már Guðmundsson, Governor of the Central Bank of Iceland, at tel: +354 569-9600.
No. 16/2012
9 May 2012