Denmark Resumes Sale of Bills in Sign Krone Pressure EasingChristian Wienberg
Denmark resumed the sale of Treasury bills after a two-month suspension as the central bank takes its first step in scaling back defenses of the euro peg.
Denmark accepted bids for 1.1 billion kroner ($160 million) in three- and six-month bills in a Monday auction, the Copenhagen-based debt office said. The agency had rejected all bids in the previous three auctions.
The central bank this year introduced unprecedented measures to fight speculation that it would have to drop the krone’s three decade-old peg after Switzerland on Jan. 15. abandoned its cap to the euro. Denmark has spent a record 275 billion kroner on interventions, suspended government bond sales and cut its key deposit rate to minus 0.75 percent.
“It’s surprising that they sold T-bills as we had expected they would wait amid concerns the pressure on the krone could return,” said Jan Stoerup Nielsen, analyst at Nordea Bank AB. “There’s no other way to see this but as a sign that the central bank is now moving toward normalization.”
The krone weakened to 7.4691 per euro as of 11:14 a.m. in Copenhagen, the lowest since 2001 according to closing prices. It has fallen about 0.5 percent from a high in January. The central bank targets keeping the krone at 7.46038 per euro inside a 2.25 percent band.
Nordea said Friday it would be too early for Denmark to resume sale of bills because pressure on the krone could revive due to European Central Bank bond purchasing and concerns on Greece’s position in the euro area.
While the bill sales were never officially suspended, the debt office rejected 26.6 billion kroner in bids in the previous three auctions.
The debt office on Monday sold 100 million kroner in bills due June 1 at a yield of minus 0.9 percent. It issued 1 billion kroner in bills maturing on Sept. 1 at a yield of minus 0.75 percent. It received total bids of 8.9 billion kroner.
“The fact they’re resuming T-bill sales shows things are moving closer to normal and that the central bank is being more relaxed,” said Jes Asmussen, chief economist at Svenska Handelsbanken AB in Copenhagen. “It has been very long since the krone was allowed to weaken this much. When the krone gets this weak, we usually see the central bank start buying kroner to firm the price, but the bank is probably waiting to see how things pan out.”