In Denmark, where institutional investors have been living with negative interest rates longer than anyone else, the authorities just took a big step.
Danish pension funds, the world’s best managed along with their Dutch peers, will finally get a 30-year government bond. When it starts trading next year, funds managing a total of $680 billion in assets will get the missing link they’ve long needed: a long-term, AAA-rated asset at a positive yield. That’s quite a novelty these days.
The new bond will give the industry a “crucial point on the curve,” said Christian Lage, chief executive officer of PFA Asset Management, which is a unit inside Denmark’s biggest commercial pension fund in Copenhagen.
“We’re following it closely,” he said in an interview. “Not only with regards to what extent we want to invest in it, but also how it’s being priced. It has an impact on a lot of different things when we price longterm exposures.”
Denmark’s central bank first cut its benchmark rate below zero in mid-2012. Almost eight years later, the county has had negative rates longer than any other place on Earth.
Source: Economic Times