Norway's Bond Market Faces Unusual Problem

Norway is repaying its debt like a good debtor, but the financial markets may not be very happy with it. With a record 66.5 billion kroner (US$11.8 billion) of bonds being repaid in May, investors are concerned about the sharp loss of liquidity in the market, which could result in higher sovereign debt prices and a weakening krone valuation, according to Bloomberg.

Since the eurozone crisis began, Norway has become a safe-haven for investors with the largest budget surplus of any AAA-rated country and no net debt. The confidence in the country is further substantiated by the fact that its debt has the lowest credit default swap spread of any developed nation, with spreads at just 43 basis points with U.S. bonds.