Copenhagen Stock Exchange: Emu Convergence In The Swedish And Danish Bond Markets

On 14 September 2003, the Swedes will vote on whether their country should become a full member of Emu, and the most recent opinion polls show that the referendum is likely to be a cliffhanger since the Yes and No camps are currently neck and neck.

In Focus no. 46, senior analyst Janne Bjerregaard and analyst Jesper Hansen, Danske Bank, assess the so-called Emu probability indicator in Sweden and Denmark and comment on its impact on the spread and the convergence potential.

The financial markets believe it most likely that it will be a No; the Danske Bank's Emu barometer shows that the markets are pricing in only a 40 per cent likelihood of a Yes vote. This offers significant convergence potential in the Swedish bond market and also implies a relatively limited risk of loss in the event of a No vote.

Opinion polls show that support for Emu entry is far stronger in Denmark, and the convergence potential is therefore smaller in Denmark. This is also attributable to the fact that Denmark already participates in the ERM2 exchange rate system.

Read the entire article "Emu convergence in the Swedish and Danish bond markets" in Focus no. 46 on the Copenhagen Stock Exchange's website www.cse.dk.