UK: Despite DST Concession Offer UK Set To Be Hit By US Tariffs

Norges Bank will aim to maintain banking system reserves at an average of NOK35bln, with a symmetric interval of +/-NOK5bln around this level. The total reserve quota (the maximum amount of total bank reserves that bank can be renumrated at the deposit rate) is set at NOK45bln.

• Previously, if Norges Bank's foreign exchange asset portfolio increased in value, the central bank would issue debt on behalf of the Government to prevent an increase in banking system reserves.
• As of this year, the government is no longer issuing government bonds to sterilise increases in banking system reserves. As such, Norges Bank has elected to sell foreign exchange (i.e. cap the asset side of its balance sheet) to keep banking reserves contained. The mechanism by which this occurs is sketched out in the following:
  • Norges Bank's foreign exchange assets increase in value. On the liability side of the balance sheet, the bank's capital increases.
  • Norges Bank sells FX (i.e. purchases NOK) to cap the foreign exchange asset side of the balance sheet. On the liability side, this drains NOK central bank reserves from the system.
  • Norges Bank's foreign exchange assets are now unchanged from before the increase in value. On the liability side, the proceeds from FX sales (reflected as an increase in the bank's capital) are transferred to the Government's account.
  • As the Government spends this money, it will filter back into central bank reserves. At the end of the process, the asset/liability mix is unchanged.
• In March, Norges Bank will sell NOK126mln/day of FX to fund the transfer of dividends to the government (i.e. buy NOK). However, this is offset by NOK400mln/day of regular FX purchases (i.e. sell NOK) on behalf of the government to place into the Government Pension Fund Global (since petroleum revenues exceed the amount needed to finance the non-oil budget deficit). As such, net purchases of FX in March will amount to NOK274mln/day (i.e. sell NOK). 

Worth noting for HKD cash demand: China's BYD to offer 118mln shares for their Hong Kong listing (ticker is 1211 HK), seeking to raise equivalent of $5.2bln in HKD.

• Sizeable demand for securities (e.g. IPOs and other share sales) can help narrow the HKD forward discount,
  which has proved sensitive in recent years to a pick-up in capital markets activity, as the uptick in cash demand in turns adds upward pressure to HIBOR.
• The $5.2bln raise is of decent size - not the largest share sale in recent years, but is comfortably the biggest capital raise of 2025 so far. Adds to the expected pipeline that also includes the long-awaited Chery Automobile IPO - seen raising as much as $14bln at some point this year.
• The HKD 12m forward discount narrowed to 300 points in October last year, but has drifted since - any narrowing could prove stickier should further fundraising headlines cross in the near-term.

Reuters reporting comments from Kremlin spokesperson Dmitri Peskov, speaking at his daily press conference in Moscow. 

• Addressing yesterday’s Ukraine summit in London, hosted by UK PM Keir Starmer, Peskov said: “Statements were made on increased funding to Ukraine – which is not aimed at peaceful settlement… it is very important that someone forces [Ukrainian President Volodymyr Zelenskyy] to change his position and seek peace.”
• Peskov declined to comment on contact between Russian President Valdimir Putin and US President Donald Trump: “There have been no additional contacts that should be made public.”
• Peskov said “any constructive initiative [to resolve the conflict] is in demand right now,” but warned, “if Russian assets are given to Kyiv there will be grave legal consequences,” noting a European proposal to use frozen Russian sovereign assets to fund Ukraine’s war effort.
• Polish Prime Minister Donald Tusk said yesterday the EU does not have a "united stance" on giving Ukraine frozen Russian assets.
• Peksov said, on Friday’s Oval Office meeting between Trump and Zelenskyy: “What happened certainly showed how difficult it will be to get onto the path of settlement on Ukraine.”
• Peskov said, “Ukraine is refusing to settle through negotiations,” adding Zelenskyy “does not want peace.”
• Peskov said the “fragmentation of the West has begun… one section of the West wants Ukraine war to continue.” He added: “Russia continues dialogue with the United States on normalising bilateral ties
• Peskov said Zelenskyy’s remarks about not ceding territory to Russia, “shows an unwillingness to accept the reality on the ground.”