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Denmark’s 10-year bond yield jumped the most in almost four weeks in Copenhagen trading as investors continued to exit haven markets amid signs Europe’s debt crisis is abating.
The yield on Denmark’s 1.5 percent note due November 2023 rose six basis points to 1.79 percent, the biggest increase since Jan. 10, according to composite Bloomberg bond trader prices. That compares with an average yield of 1.54 percent since the debt office introduced the bond in September. The difference in yield to similar-maturity German bunds widened 1.5 basis points to 13 basis points.
Demand for debt sold by AAA rated Denmark has faded as policy makers inside the euro area persuade investors they’re able to stem the region’s fiscal turmoil. Danish government bonds were the world’s worst-performing debt class in January after investors ended a hedge that at the height of the crisis had benefited from the country’s euro peg without the drawback of bailout commitments.
“There’s a more optimistic outlook for the European economy,” Jens Nyholm, chief economist at Spar Nord A/S, said by phone. “That there would be some form of correction in the bond market is something that we have expected for a long time, given the extremely low rates we’ve had.”
The debt office in Copenhagen sold its 1.5 percent 2023 bond at a yield of 1.77 percent today, marking the highest borrowing cost over the seven auctions held since the note was opened last year. The yield was 1.67 percent at the previous Jan. 22 auction.
The Danish central bank, which pegs the krone to the euro, last month raised its benchmark interest rates for the first time since July 2011 as investor appetite for krone assets waned, weakening the currency against the euro. The bank said yesterday it spent twice as much in January to support the krone as in the previous four months combined.
Yields on Danish bonds plunged in 2012 as the European debt crisis attracted investors who favored safety over returns. The euro has this year gained against the dollar on bets the worst of the three-year debt crisis is over.
“There’s no doubt that we have seen the bottom,” Nyholm said. “There will still be volatility in the market and in economic data, but I think most investors are convinced that we have seen the worst and things are stabilizing now.”
Nationalbanken said yesterday it purchased a net 11.9 billion kroner ($2.17 billion) to strengthen the krone in January.
The central bank last month raised its lending rate to 0.3 percent from 0.2 percent, and increased its deposit rate to minus 0.1 percent from minus 0.2 percent.
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