Danish Government Cuts 2016 Borrowing Requirement to $23 Billion

Denmark cut its borrowing need for this year as the government scales back its plans for krone-denominated financing.

The Finance Ministry will need to borrow 152 billion kroner ($23 billion) in 2016, down from the 158 billion kroner it previously forecast, according to a statement published on its website late on Thursday. Some 132 billion kroner of that will be in the form of debt issued kroner, it said.

“Despite the lower borrowing need, we expect the debt office to stick with the current issuance strategy for the second half of the year,” Jan Stoerup Nielsen, a senior analyst at Nordea Markets, said in a note.

The government has set itself a goal of selling 75 billion kroner in bonds in 2016, concentrated in maturities of two and 10 years.

Denmark cut its 2016 forecast for gross domestic product growth in April, to 1.1 percent from 1.9 percent previously. Economic expansion is stalling despite an unprecedented wave of monetary stimulus, with Danes living through almost four years of negative interest rates. The central bank uses policy to defend the krone’s peg to the euro, and most forecasters predict rates won’t go positive until 2018 at the earliest.

The yield on Denmark’s benchmark 10-year bond traded at about 0.4 percent on Thursday, compared with 0.1 percent for similar-maturity notes sold by the government of Germany.

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