Danish 30-year bond yields jumped to the highest in a month in Copenhagen trading after the government agreed to ease rules for the country’s pension firms to help reduce liabilities.
The yield on Denmark’s 4.5 percent note due 2039 soared 13 basis points to 2.09 percent as of 11:28 a.m. local time, the highest since May 11. The bond underperformed similar-maturity debt in Germany where yields rose two basis points less.
Danish pension companies and life insurers will be allowed to raise the discount rate they use to calculate their liabilities to better reflect long-term growth and inflation prospects, the government said late yesterday. The change reduces the industry’s incentive to continue buying up longer-dated debt as record-low bond yields have inflated the value of their obligations.
“The demand for duration isn’t as strong as before,” Henrik Henriksen, chief investment strategist at Copenhagen-based PFA Pension A/S, Denmark’s second-largest pension fund with about $50 billion in assets, said in an interview. “Looking especially at the 30-year point, there’s less demand for 30-year bonds due to the new rate curve.”