Danish Covered Bonds Gain as Haven Bets Return: Copenhagen Mover

Danish mortgage bonds gained and yields extended declines in Copenhagen trading as investors sought refuge in Europe’s second-largest mortgage-backed covered bond market following signs of a slowdown in the euro area.

The yield on Nykredit A/S’s 3.5 percent callable bond maturing 2044 fell to 3.73 percent, its lowest since Aug. 20, according to SEB Merchant Banking data compiled by Bloomberg. A similar-maturity Realkredit Danmark bond yielded 3.73 percent, also its lowest since Aug. 20.

“The haven play is still relevant,” Lise Bergmann, a housing economist at Nykredit, said by phone. “Disappointing” data from Germany and signals from the European Central Bank it may need to do more to support the euro area are driving down yields particularly in the long end, Bergmann said.

German business confidence rose less than expected earlier this week, and ECB President Mario Draghi said he will “use any instrument,” including another long-term refinancing operation, to curb excessive rises in money market rates.

Until this month, Denmark’s mortgage bonds had been losing ground. The Nykredit index fell to a year-low of 399.46 on Sept. 5. Since then, the index has risen to 402.90.

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