November 2015 refinancing auctions
Jan Weber Østergaard
Senior Analyst
+45 45 13 07 89
[email protected]
November 2015
www.danskebank.com/research
Investment Research
www.danskebank.com/CI
Christina E. Falch
Senior Analyst
+45 45 12 71 52
[email protected]
Jens Peter Sørensen
Chief analyst
+45 45 12 85 17
[email protected]
Agenda
Danish mortgage banks will issue some DKK150bn in DKK-denominated 1Y-5Y
covered bonds and EUR3.8bn in EUR-denominated covered bonds - a total of
DKK172bn.
There is plenty of liquidity as DKK212bn in DKK-denominated noncallables and
EUR4.5bn in EUR-denominated covered bonds are maturing.
The Danish noncallable curve is very steep relative to the DKK swap, DKK OIS, EU
swap, EU OIS and German govt curve, and there is significant carry looking at
forward rates. See page 3.
The noncallables are cheap relative to DKK swaps and DK government bonds, as
well as swapped into EUR, USD and GBP (see pages 6-8).
2
Trade recommendations
Spread target at the auction:
•
Buy 1Y noncallable bullets @ 23-25bp (vs DKK OIS)
•
Buy 3Y non-callable bullets @ 14-16bp (vs 3M Cibor).
•
Buy 5Y noncallables @ 30-33bp (vs 3M Cibor)
RV trades
•
Sell DGB 2.5% 16 and DGB 4% 2017 and buy 3Y noncallables @ 92bp and 80bp,
respectively
•
Buy 3Y noncallables and pay 3Y EUR swap @ 30bp (6M Euribor)
•
Buy 5Y noncallables and pay 5Y EUR swap @ 55bp (6M Euribor)
•
Buy 1Y noncallables outright @-10bp. We do not see value in hedging 1Y non-callable
bullets given the dovish ECB.
3
Plenty of value in Danish noncallable mortgage bonds
RD 1 T 01JAN2017 IT
RD 1 T 01JAN2018 IT
RD 1 T 01JAN2019
RD 2 T 01JAN2020
RD 1 T 01JAN2021
RD 2 T 01JAN2022
RD 1 T 01JAN2023
RD 2 T 01JAN2024
yield
-0.07%
0.31%
0.39%
0.55%
0.81%
1.11%
1.35%
1.51%
dkswp6m dkkois euswp6m eurois
0.08%
-0.37%
-0.06%
-0.28%
0.17%
-0.28%
-0.05%
-0.27%
0.30%
-0.15%
0.02%
-0.21%
0.45%
0.00%
0.14%
-0.10%
0.61%
0.17%
0.28%
0.04%
0.78%
0.34%
0.43%
0.19%
0.93%
0.50%
0.58%
0.34%
1.07%
0.66%
0.73%
0.49%
DK govt*
-0.59%
-0.46%
-0.27%
-0.08%
0.27%
0.27%
0.59%
0.59%
DE Govt*
-0.37%
-0.35%
-0.28%
-0.18%
-0.06%
0.06%
0.22%
0.38%
*Note. This is actual government bonds rather than generic rates
Forward rates
1Y1Y
2Y1Y
3Y1Y
4Y1Y
5Y1Y
6Y1Y
7Y1Y
Non-callables
0.73%
0.58%
1.04%
1.88%
2.72%
2.78%
2.68%
DK swp
DKK OIS
0.27%
0.58%
0.94%
1.28%
1.61%
1.87%
2.11%
-0.18%
0.13%
0.50%
0.86%
1.22%
1.52%
1.78%
EU swap EU OIS
-0.03%
0.18%
0.52%
0.86%
1.21%
1.51%
1.77%
-0.27%
-0.07%
0.25%
0.60%
0.97%
1.30%
1.58%
German govt bonds
-0.32%
-0.13%
0.13%
0.44%
0.68%
1.20%
1.58%
The forward rates are 1Y forwards between 1/1/2017, 1/1/2018, 1/1/2019. Hence, these forward rates give an indication
of the steepness of the curve as well as the ”hedge” cost. Hence, the Danish noncallable curve is very steep relative to e.g. the
DKK OIS curve and EUR OIS.
Hedging in DK swap is expensive given the high forward rates.
Source: Danske Bank Markets
4
ASW spreads wide relative to DKK swaps
bp
ASW-spreads for Danish noncallable covered bonds, bp
100
80
5Y Noncallable swapped into DKK swap (6M cibor)
60
3Y Noncallable swapped into DKK swap (6M cibor)
40
1Y Noncallable swapped into DKK swap (6M cibor)
20
-20
-40
-60
-80
Jan-07 Sep-07 May-08 Jan-09 Sep-09 May-10 Jan-11 Sep-11 May-12 Jan-13 Sep-13 May-14 Jan-15 Sep-15
Source: Danske Bank Markets
5
Non-callable flex bonds are still attractive alternatives to EUR
covered bonds
Danish non-callable interest-reset bonds basis-swapped
from 3M CIBOR to 3M EURIBOR have traded at a pick-up
to other European covered in recent years .
•
•
•
CCS DKK3M EUR3M
0.00
3Y
-0.05
The spread between Danish covered bonds and EUR
covered bonds has increased in recent months as a result
of the recent spread widening – especially for the longer
maturities. In addition, we have seen a spread widening of
the EUR-DKK cross currency swaps.
-0.10
Hence, Danish non-callable interest-reset bonds are
attractive alternatives to EUR covered bonds.
-0.35
5Y
-0.15
-0.20
-0.25
-0.30
-0.40
Jan-12
60
50
Jan-13
Jul-13
Jul-14
Jan-15
Jul-15
100
Netherlands
Sweden
Finland
Germany
Denmark
80
60
ASW EUR3M
40
30
20
10
40
20
0
-20
BNP (FR)
Eurohypo (DE)
RD (DK)
Swedbank (SE)
0
-40
-10
-20
Nov-14
Jan-14
ASW EUR3M relative to BPV
5Y Covered bonds - ASW EUR3M
70
Jul-12
DNBNO
ING (NL)
RD EUR (DK)
Swedbank EUR (SE)
-60
Jan-15
Source: Danske Bank Markets
Mar-15
May-15
Jul-15
Sep-15
0
2
4
6
8
10
BPV
6
Non-callable flex bullets offer attractive pickup to Danish govies
•
Non-callable flex bullets offer attractive pickup to Danish govies. The GovYSC spreads
(spreads between non-callable flex bullets and the government bond curve) are at their
highest level in almost three years (if we exclude the period early in the year when we saw a
significant spike in the GovYCS).
•
The short-dated bonds (1Y and 3Y) offer particularly attractive pickup to Danish govies.
•
GovYCS curve is not as steep between 3Y and 1Y as the ASW curve.
90
GovYCS- non-callables (level 1B)
1Y generic Flex
3Y generic Flex
5Y generic Flex
80
70
GovYCS slope (level 1B)
1-3Y
25
3-5Y
20
60
15
50
10
40
5
30
0
20
-5
10
0
Jan-13
30
Jul-13
Source: Danske Bank Markets
Jan-14
Jul-14
Jan-15
Jul-15
-10
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
7
Yield pick-up for non-callables swapped into EUR against core,
semi-core and covered bonds
Plenty of yield pick-up to EU core, semi-core and covered bonds, when swapped into EUR.
Plenty of value in the long end of the curve.
DGBs and DK covered bonds swapped into EUR - yield comparison to EU peers, %
0.40%
DGB+DGTB
DK covered bonds
0.30%
German govt bonds
Semi-core
0.20%
EU covered bonds
0.10%
0.00%
-0.10%
-0.20%
-0.30%
-0.40%
Jul-15
Source: Danske Bank Markets
Jan-16
Aug-16
Mar-17
Sep-17
Apr-18
Oct-18
May-19
Dec-19
Jun-20
8
Danish noncallables swapped into USD - yield pick-up to US
Treasuries
DGBs and DK covered bonds swapped into USD - comparison to US Treasuries, %
3.00%
DGB+DGTB
2.50%
DK covered bonds
2.00%
US Treasuries
1.50%
1.00%
0.50%
0.00%
Dec-14
Source: Danske Bank Markets
May-16
Sep-17
Feb-19
Jun-20
Oct-21
9
Danish noncallables swapped into GBP - yield pick-up to UK
Gilts
Danish fixed income assets swapped into GBP versus Gilts
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
0
1
DGTB
Source: Danske Bank Markets
2
DGB
3
4
Noncallable covered bonds
5
6
UK Gilts
10
Plenty of liquidity in Denmark between 15 November 2015
and 1 January 2016
Redemptions and coupons – Danish covered bonds
•
DKK-den. Non-callables maturing January 2016
DKK 212bn
•
EUR-den. Non-callables maturing January 2016
DKK 37bn
•
Capped floaters maturing January 2016
DKK 17bn
•
Coupons
DKK 17bn
•
Prepayments from callables
DKK 15bn
•
Total in DKK
DKK 295bn
•
Total in EUR
EUR 40bn
Redemptions and coupons – Danish T-bills and government bonds
•
DGB 4% Nov-15 – redemptions
DKK 62bn (EUR 9bn)
•
Coupons
DKK 22bn (EUR 3bn)
•
T-bills maturing on 1 December 2015
DKK 8bn (EUR 1bn)
11
Auction supply in non-callable flex bonds of DKK175bn
•
The total auction supply in DKK-denominated bonds amounts to around DKK145bn
(excluding Kommunekredit) and DKK150bn (including Kommunekredit).
•
The auction amount in EUR-denominated bonds amounts to EUR3.0bn (excluding
Kommunekredit) and EUR3.8bn (including Kommunekredit).
•
The auctions will take place from 16 to 27 November and on 2 December (only DLR)
Auction Schedule
Announced auction amounts - November 2015 refinancing auctions
(The auction amount from KommuneKredit is our estimate)
1Y
2Y
3Y
4Y
5Y
> 5Y
Total DKK Bonds 1Y EUR
Total DKK
Date
RD
NYK
l
l
NDA
BRF
DLR
RD
32.5
2.8
13.6
1.0
7.1
1.0
57.8
1.0
65.4
16-Nov-15
NYK
15.9
0.5
5.2
0.2
2.1
0.0
23.9
0.7
28.9
17-Nov-15
l
l
l
22.9
18-Nov-15
l
l
l
34.4
19-Nov-15
l
l
l
16.1
20-Nov-15
l
l
ll
l
l
167.8
23-Nov-15
l
l
l
l
l
NDA
BRF
DLR
Total (excl. KOM)
13.5
28.1
7.6
1.0
0.9
0.9
97.6
6.0
KOM
0.4
Total (incl. KOM)
98.0
4.3
3.4
1.5
0.0
0.1
0.2
28.0
1.5
0.0
0.0
6.0
28.0
0.4
0.9
0.9
0.0
0.0
0.0
11.3
1.0
0.1
4.5
1.5
15.8
19.2
33.3
11.1
0.5
0.1
0.7
145.3
3.0
0.0
5.0
0.7
5.0
24-Nov-15
l
l
l
1.0
150.3
3.8
172.8
25-Nov-15
l
l
l
26-Nov-15
l
l
KOM
27-Nov-15
30-Nov-15
01-Dec-15
l
02-Dec-15
l
Source: Danske Bank Markets
Capped floater auctions
12
Large reductions in the supply of 1Y, 3Y and 5Y bonds
•
The auction amounts from Nykredit and Nordea Kredit are generally lower than expected – especially in
the 1Y segment.
•
The auction amounts from RD are down significantly, in the 3Y and 5Y segments particularly.
•
The average refinancing rate (auction amount relative to expiry of Jan-16 bonds) is around 70%.
Estimated auction amount based on refinancing rate of 90% for DKK bonds and 95% for EUR bonds
1Y
2Y
3Y
4Y
5Y
> 5Y
Total DKK Bonds
1Y EUR
Total DKK
RD
31.9
2.1
22.1
1.2
10.1
3.7
71.0
1.4
81.6
NYK
23.6
0.9
5.5
0.4
2.8
1.7
34.9
1.6
46.6
NDA
19.3
0.7
7.7
0.1
1.2
0.5
29.5
0.7
34.8
BRF
31.9
0.6
3.5
0.8
3.2
1.2
41.2
0.1
42.3
DLR
9.4
0.7
1.5
0.2
1.5
0.0
13.3
0.9
19.7
1Y
2Y
3Y
4Y
5Y
> 5Y
Total DKK Bonds
1Y EUR
Total DKK
RD
32.5
2.8
13.6
1.0
7.1
1.0
62.6
1.0
71.3
NYK
15.9
0.5
5.2
0.2
2.1
0.0
23.9
0.7
28.9
NDA
13.5
1.0
4.3
0.0
0.4
0.0
19.2
0.5
22.9
BRF
28.1
0.9
3.4
0.1
0.9
0.0
38.4
0.1
39.5
DLR
7.6
0.9
1.5
0.2
0.9
0.0
11.8
0.7
17.3
Auction amounts
Difference between auction amounts and estimated auction amount (90%/95% refinancing rate)
1Y
Source: Danske Bank Markets
2Y
3Y
4Y
5Y
> 5Y
Total DKK Bonds
1Y EUR
Total DKK
RD
0.6
0.6
-8.5
-0.2
-3.1
-2.7
-8.5
-0.4
-10.2
NYK
-7.6
-0.4
-0.4
-0.2
-0.7
-1.7
-11.0
-0.9
-17.6
NDA
-5.8
0.3
-3.4
-0.1
-0.8
-0.5
-10.3
-0.2
-11.9
BRF
-3.8
0.2
-0.1
-0.7
-2.3
-1.2
-2.8
0.0
-2.8
DLR
-1.8
0.2
0.0
0.0
-0.7
0.0
-1.5
-0.2
-2.4
Total
-18.4
1.0
-12.4
-1.2
-7.5
-6.1
-34.1
-1.7
-45.0
13
Expected LCR classification
•
RD, Nykredit, Nordea Kredit, BRFkredit and DLRkredit will sell DKK170m in non-callable flex bonds at the auctions. Level 1B
assets amount to around DKK150bn, level 2A to around DKK8.2bn and level 3 to around DKK13.7bn.
•
RD has the largest share of level 1B assets to be sold at the auction.
ISIN
Auction
amount (bn)
Expected LCRclassification
15.500
Level 1B
4.700
Level 1B
DK0009503005 NYK DKK 1'21 (Jan) SDO(H) RF
1.750
Level 2A
DK0009799454 NYK DKK 1'19 (Jan) RO(D) RF
0.480
Level 3
DK0009508079 NYK EUR 1'17 (Jan) SDO(H) IT+RF
0.670
Level 1B
LU1132414548 NYK EUR 1'19 (Jan) SDO(H) RF
0.200
Level 3
DK0009508749 NYK DKK Var. Jul-21 SDO(H) CF
3.800
Level 1B
DK0009508822 NYK DKK Var. Jul-26 SDO(H) CF
7.000
Level 1B
Auction
amount (bn)
Expected LCRclassification
Auction
amount (bn)
Expected LCRclassification
DK0009295495 RD DKK 1'17 (Jan) SDRO(T) IT+RF
32.50
Level 1B
DK0009507857 NYK DKK 1'17 (Jan) SDO(H) IT+RF
DK0009295578 RD DKK 1'18 (Jan) SDRO(T) IT +RF
2.76
Level 2A
DK0009502890 NYK DKK 1'19 (Jan) SDO(H) RF
DK0009295651 RD DKK 1'19 (Jan) SDRO(T) RF
13.60
Level 1B
DK0009295735 RD DKK 1'20 (Jan) SDRO(T) RF
0.95
Level 3
DK0009295818 RD DKK 1'21 (Jan) SDRO(T) RF
7.05
Level 1B
DK0009296113 RD DKK 1'23 (Jan) SDRO(T) RF
0.70
Level 3
LU1153685240 RD EUR 1'17 (Jan) SDRO(T) IT+RF
1.02
Level 1B
ISIN
Name
Name
Auction
amount (bn)
Expected LCRclassification
DK0006338603 DLR DKK 1'17 (Jan) IT+RF
7.60
Level 1B
DK0006338793 DLR DKK 1'18 (Jan) IT+RF
0.93
DK0006338876 DLR DKK 1'19 (Jan) RF
1.49
DK0006338959 DLR DKK 1'20 (Jan) RF
0.21
Name
Level 3
TBA
BRF DKK 1'17 (Jan) SDO(E) IT+RF
16.000
Level 1B
Level 3
DK0009385809 BRF DKK 1'19 (Jan) SDO(E) RTL-F
10.500
Level 1B
Level 3
DK0009383432 BRF DKK 1'19 (Apr) SDO(E) RTL-F
2.800
Level 1B
DK0009384406 BRF DKK 1'18 (Apr) SDO(E) RF
0.900
Level 1B
DK0009387425 BRF DKK 1'20 (Jan) SDO(E) RTL-F
0.860
Level 3
DK0009386021 BRF DKK 1'19 (Jan) SDO(E) RF
3.150
Level 1B
DK0009384596 BRF DKK 1'19 (Apr) SDO(E) RF
3.450
Level 1B
DK0009386104 BRF DKK 1'20 (Jan) SDO(E) RF
0.080
Level 3
DK0009385213 BRF DKK 1'20 (Oct) SDO(E) RF
1.250
Level 2A
DK0009386294 BRF DKK 1'21 (Jan) SDO(E) RF
0.575
Level 3
DK0009386880 BRF DKK 1'19 (Jan) RO(B) RTL-F
1.600
Level 3
DK0009387185 BRF DKK 1'19 (Jan) RO(B) RF
0.260
Level 3
DK0009389553 BRF DKK 1'21 (Jan) RO(B) RF
0.290
Level 3
DK0009389397 BRF EUR 4'19 (Jan) SDO(H) RTL-F
0.040
Level 3
0.86
Level 3
DK0006339171 DLR EUR 1'17 (Jan) IT+RF
0.67
Level 1B
DK0006339254 DLR EUR 1'18 (Jan) IT+RF
0.01
Level 3
Auction
amount (bn)
Expected LCRclassification
DK0002034164 NDA DKK 2'17 (Jan) SDRO(2) IT+RF
13.500
Level 1B
DK0002034081 NDA DKK 2'18 (Jan) SDRO(2) IT+RF
1.000
Level 3
DK0002033869 NDA DKK 2'19 (Jan) SDRO(2) RF
4.275
Level 1B
DK0002033869 NDA DKK 2'21 (Jan) SDRO(2) RF
0.425
Level 3
DK0002035211 NDA EUR 1'17 (Jan) SDRO(2) IT+RF
0.500
Level 2A
Name
Source: Danske Bank Markets
Name
ISIN
DK0006339098 DLR DKK 1'21 (Jan) RF
ISIN
ISIN
14
Pricing of level 2A and level 3 assets relative to level 1B
•
There is large uncertainty about the pricing of level 3 assets relative to level 1B assets, and it is difficult to come up
with a clear indication of the fair value pickup between non-level 1B assets relative to level 1B assets.
•
Theoretically, an LCR investor would require a premium of 4bp and 38bp, respectively, to invest in a level 2A or 3
asset relative to a level 1B asset. This premium is calculated under the assumption that there is a risk weight of
10% and a funding rate of 40bp. This calculation is very sensitive to the funding assumptions and we assume that
there is no cap on the amount of level 2A and 3 assets.
•
LCR investors are not the typical level 2A and 3 investors, but LCR investors’ reduced incentive to buy level 2A and 3
assets should lead other investor types to require a premium to buy level 2A and 3 assets.
•
We estimate premiums to be 3-8bp between level 2A and level 1B, and 8-15bp between level 3 and level 1B assets.
Level 1(A)
ASW curve - RD non-callable Flex bonds
Level 1(B)
Level 2(A)
Level 3
10% risk weight 10% risk weight 10% risk weight
80
Yield
0.00%
Break-even spread, bps
Haircut
60
Notional required
Risk weight
0.14%
0.18%
0.52%
14.32
17.52
51.52
0%
7%
15%
100%
100.00%
107.53%
117.65%
200.00%
0%
10%
10%
10%
40
20
-20
Source: Danske Bank Markets
4
6
8
10
12%
12%
1.29%
1.41%
1.20%
Cost of CET1 capital
10%
10%
10%
10%
CET1 capital charge
0.00%
0.13%
0.14%
0.12%
100.00%
106.24%
116.24%
198.80%
100%
100%
100%
100%
100.00%
100.00%
100.00%
100.00%
Funding costs (OIS)
0.00%
0.00%
0.00%
0.00%
Net LT funding (snr)
0.00%
6.24%
16.24%
98.80%
0.40%
0.40%
0.40%
0.40%
0.00%
0.02%
0.06%
0.40%
Funding need (OIS)
Level 3
2
12%
0.00%
Target LCR
Level 2A
0
12%
CET1 capital needed
Funding need (net of CET1)
Level 1B
0
CET1 ratio required
12
LT funding costs (3Y snr)
Total funding charge
15
Results of recent refinancing auctions
3Y DKK : Average ASW(3M)
1Y DKK : Average spread to Cita
50bp
40bp
35bp
RD
Nykredit
Nordea
DLR
BRF
40bp
30bp
30bp
25bp
20bp
20bp
RD
Nykredit
Nordea
DLR
BRF
15bp
10bp
5bp
0bp
40bp
30bp
10bp
0bp
0bp
-10bp
Dec. Mar. Sep. Nov. Feb.
May Aug.
2013 2014 2014 2014 2015 2015 2015
Nykredit Nordea DLR BRF
RD
Nykredit Nordea DLR BRF
Dec. Mar. Sep. Nov. Feb.
May Aug.
2013 2014 2014 2014 2015 2015 2015
7
5Y DKK: Average Bid-to-cover
RD
Nykredit Nordea DLR BRF
6
5
5
4
3
-10bp
3Y DKK: Average Bid-to-cover
6
RD
50bp
20bp
1Y DKK: Average Bid-to-cover
4
RD
Nykredit
Nordea
DLR
BRF
60bp
10bp
Dec. Mar. Sep. Nov. Feb.
May Aug.
2013 2014 2014 2014 2015 2015 2015
5
5Y DKK : Average ASW(3M)
70bp
4
3
3
2
2
1
2
1
1
0
0
Dec.
Mar.
2013 2014
Sep.
2014
Nov.
Feb.
May
Aug.
2014 2015 2015 2015
Source: Danske Bank Markets
Dec.
Mar.
2013 2014
Sep.
2014
Nov.
Feb.
May
Aug.
2014 2015 2015 2015
0
Dec.
Mar.
Sep.
Nov.
Feb.
May
Aug.
2013 2014 2014 2014 2015 2015 2015
16
Increasing foreign holdings of Danish non-callable flex bullets
•
•
•
Monetary financial institutions reduced
their share of DKK-denominated noncallable bullets by DKK227bn from
December 2014 to September 2015.
During the same period, insurance
companies/pension funds and foreign
investors increased their share of DKKdenominated non-callable bullets by
DKK60bn and DKK38bn, respectively.
The outstanding volume of non-callable
bullets decreased by around DKK125bn
from December 2014 to September
2015.
Investor distribution (DKKbn) - Non-callable Flex bonds
1,200
Non-financial corporations
Insurance corporations/pension funds
Households
Foreign
Monetary financial institutions
General government
Unallocated domestic
1,000
800
600
400
200
0
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Investor distribution (%) - Non-callable Flex bonds
80%
Non-financial corporations
Insurance corporations/pension funds
Households
Foreign
Monetary financial institutions
General government
Unallocated domestic
60%
40%
20%
0%
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Source: Danmarks Nationalbank
17
Sell DGB 2.5% 11/16 and DGB 4% 11/17 and buy 3Y
noncallables at the auction
Switch out of DGB 2.5% '16 and DGB 4% '17 and into 3Y
noncallables at the auction, as
•There will be plenty of short-dated government bonds and bills in
the coming months as the Danish central bank will tap in the
DGB 0.25% 18, and sell a high volume of T-bills. A new 6mth Tbill will be introduced in December, and new 9mth or 12mth
T-bills may even be announced.
Spread
DGB 4 15NOV2017
bp
RD 1 T 01JAN2019
0.80
100
0.60
90
0.40
80
70
0.20
60
0.00
50
-0.20
• There is significant excess return to move further out the curve
and "down" the credit in order to buy AAA-rated Danish covered
bonds. The forward rate between DGB 4% 17 and RD 1% Jan
19 is almost 2% - hence there is plenty of protection if rates rise
in two years’ time.
More easing from the ECB in December will likely include an
extension of the forward guidance - thus rates low for longer and rate cuts.
•
• Finally, if the ECB goes "nuclear" and increases QE significantly ,
then selling short-dated DGBs gives better protection than
selling short-dated EU government and covered bonds.
30
-0.60
20
-0.80
10
-1.00
Dec-14
• A more "irrational" argument - DGB 4% 11/17 trades at 109,
while RD 1% 01/19 trades at 101.9 - so there is an excess
"revenue" of 7pts by selling DGB 4'7.
40
-0.40
0.60
0
Feb-15
Apr-15
Jun-15
spread
RD 2 T 01JAN2018
Aug-15
Oct-15
DGB 2.50 15NOV2016
bp
80
0.40
70
0.20
60
0.00
-0.20
50
-0.40
40
-0.60
30
-0.80
20
-1.00
10
-1.20
-1.40
Oct-14
Source: Danske Bank Markets
0
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
18
Bond supply set to continue falling at the November auctions
•
We expect just under DKK175bn in DKK-denominated bonds (including Kommunekredit) to
be auctioned at the November refinancing auctions, down around DKK15bn from last year’s
November auctions.
•
The supply of 1Y and 3Y bonds is set to decline by DKK17bn and DKK5bn, respectively,
from last year, while the supply of 5Y bonds is likely to increase by DKK6bn.
F1
F2
Dec-05
500
Dec-03
Total supply of DKK noncallables (DKK bn)
F3
F4
F5
400
300
200
100
Source: Danske Bank Markets
Nov-15
May-15
Nov-14
Jun-14
Dec-13
Mar-13
Sep-12
Dec-11
Mar-11
Sep-10
Dec-09
Mar-09
Sep-08
Dec-07
Mar-07
Sep-06
Dec-01
0
19
Disclosures
This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S (‘Danske Bank’). The authors of the research report are Jan Weber
Østergaard, Senior Analyst, Jens Peter Sørensen, Senior Analyst and Christina Falch, Senior Analyst.
Analyst certification
Each research analyst responsible for the content of this research report certifies that the views expressed in the research report accurately reflect the research
analyst’s personal view about the financial instruments and issuers covered by the research report. Each responsible research analyst further certifies that no part of the
compensation of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations expressed in the research report.
Regulation
Danske Bank is authorised and subject to regulation by the Danish Financial Supervisory Authority and is subject to the rules and regulation of the relevant regulators in
all other jurisdictions where it conducts business. Danske Bank is subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority
(UK). Details on the extent of the regulation by the Financial Conduct Authority and the Prudential Regulation Authority are available from Danske Bank on request.
The research reports of Danske Bank are prepared in accordance with the Danish Society of Financial Analysts’ rules of ethics and the recommendations of the Danish
Securities Dealers Association.
Conflicts of interest
Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of high-quality research based on research objectivity and
independence. These procedures are documented in Danske Bank’s research policies. Employees within Danske Bank’s Research Departments have been instructed
that any request that might impair the objectivity and independence of research shall be referred to Research Management and the Compliance Department. Danske
Bank’s Research Departments are organised independently from and do not report to other business areas within Danske Bank.
Research analysts are remunerated in part based on the overall profitability of Danske Bank, which includes investment banking revenues, but do not receive bonuses or
other remuneration linked to specific corporate finance or debt capital transactions.
Danske Bank is a market maker and may hold positions in the financial instruments mentioned in this research report.
Danske Bank, its affiliates and subsidiaries are engaged in commercial banking, securities underwriting, dealing, trading, brokerage, investment management, investment
banking, custody and other financial services activities, may be a lender to the companies mentioned in this publication and have whatever rights are available to a
creditor under applicable law and the applicable loan and credit agreements. At any time, Danske Bank, its affiliates and subsidiaries may have credit or other information
regarding the companies mentioned in this publication that is not available to or may not be used by the personnel responsible for the preparation of this report, which
might affect the analysis and opinions expressed in this research report.
See http://www-2.danskebank.com/Link/researchdisclaimer for further disclosures and information.
20
General disclaimer
This research has been prepared by Danske Bank Markets (a division of Danske Bank A/S). It is provided for informational purposes only. It does not constitute or form
part of, and shall under no circumstances be considered as, an offer to sell or a solicitation of an offer to purchase or sell any relevant financial instruments (i.e. financial
instruments mentioned herein or other financial instruments of any issuer mentioned herein and/or options, warrants, rights or other interests with respect to any such
financial instruments) (‘Relevant Financial Instruments’).
The research report has been prepared independently and solely on the basis of publicly available information that Danske Bank considers to be reliable. While
reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and Danske Bank,
its affiliates and subsidiaries accept no liability whatsoever for any direct or consequential loss, including without limitation any loss of profits, arising from reliance on this
research report.
The opinions expressed herein are the opinions of the research analysts responsible for the research report and reflect their judgement as of the date hereof. These
opinions are subject to change, and Danske Bank does not undertake to notify any recipient of this research report of any such change nor of any other changes related to
the information provided in this research report.
This research report is not intended for retail customers in the United Kingdom or the United States.
This research report is protected by copyright and is intended solely for the designated addressee. It may not be reproduced or distributed, in whole or in part, by any
recipient for any purpose without Danske Bank’s prior written consent.
Disclaimer related to distribution in the United States
This research report is distributed in the United States by Danske Markets Inc., a U.S. registered broker-dealer and subsidiary of Danske Bank, pursuant to SEC Rule 15a6 and related interpretations issued by the U.S. Securities and Exchange Commission. The research report is intended for distribution in the United States solely to ‘U.S.
institutional investors’ as defined in SEC Rule 15a-6. Danske Markets Inc. accepts responsibility for this research report in connection with distribution in the United
States solely to ‘U.S. institutional investors’.
Danske Bank is not subject to U.S. rules with regard to the preparation of research reports and the independence of research analysts. In addition, the research analysts
of Danske Bank who have prepared this research report are not registered or qualified as research analysts with the NYSE or FINRA but satisfy the applicable
requirements of a non-U.S. jurisdiction.
Any U.S. investor recipient of this research report who wishes to purchase or sell any Relevant Financial Instrument may do so only by contacting Danske Markets Inc.
directly and should be aware that investing in non-U.S. financial instruments may entail certain risks. Financial instruments of non-U.S. issuers may not be registered with
the U.S. Securities and Exchange Commission and may not be subject to the reporting and auditing standards of the U.S. Securities and Exchange Commission.
21