Copenhagen Stock Exchange: Focus: Seasonal Effects In The Danish Bond Market

In Focus no. 65 Jens Peter Sørensen and Hasse Lucht, Danske Bank, look at the seasonal pattern of the Danish-German yield spreads on the basis of the period from September till December since 1994.

Sørensen and Lucht establish a significant seasonal effect in the 10- and 30- year spreads as the spreads narrow in November and December. The tightening is currently in the order of 5-10 basis points, but used to be around 10-20 basis points. However, the seasonal effect of the government's 2- and 5-year spreads were inconclusive.

The authors explain that the seasonal effect is both due to the fact that the Danish central bank finances most of its borrowing requirements in the beginning of November and that a substantial amount of coupon payments on government bullet loans fall due on November 15.

The introduction of electronic trading in Danish government bonds later this year will probably also provide increased transparency and turnover in Danish government bonds.

To read the article "Seasonal effects in the Danish bond market" in Focus no. 65 click here.