Denmark’s two-year debt yields rose to the highest level in four months in Copenhagen trading as the haven allure of the country’s bonds dims amid optimism the euro- area is recovering from its crisis.
The yield on Denmark’s 2 percent note due November 2014 rose to 0.114 percent from 0.1 percent on Jan. 18, the highest since Sept. 17. The yield hit a 2012 low of minus 0.323 percent on July 18, according to Composite Bloomberg Bond Trader prices.
“Investors no longer want to buy the so-called safe countries’ bonds at the same low yields as we saw last year,” Jacob Graven, an economist at Aabenraa, Denmark-based Sydbank A/S, said by phone.
Yields on bonds issued by AAA rated Denmark plunged in 2012 as the European debt crisis attracted investors who favored safety over returns. The euro has had its best start to a year against the dollar since 2006 on bets the worst of the three- year debt crisis is over.
“Since the turn of the year, international financial markets have recovered, and that has reduced the safe-haven status that a few countries, including Denmark, have been enjoying,” Graven said. “The U.S. reached a budget deal that prevented the so-called fiscal cliff, and at the same time, uncertainty caused by the European debt crisis is shrinking.”
Yields on Denmark’s shorter-dated bonds have advanced more than those on longer-dated debt after a weakening of the krone sparked speculation the central bank, which defends the currency’s peg to the euro, will have to raise interest rates soon, Graven said.
The central bank will raise its lending rate, currently at a record-low 0.2 percent, to 0.3 percent in the first quarter of 2013, possibly “already within a few weeks” to protect the peg, he said.
The krone traded at 7.4631 against the euro today, little changed from yesterday. It has weakened from a 2012 peak of 7.4306 on May 25, according to prices available on Bloomberg.
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