DGB preview DGB28 and DGB35 Wednesday

DGB preview: DGB28 and DGB35 Wednesday Marketing communication This report has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Nordea Markets may have positions in the mentioned financial instruments. Some of the views and opinions expressed in this article are solely those of the author(s) and do not necessarily reflect the views of Nordea.

Wednesday the Danish central bank will auction DGB28 and DGB35. On a hedged and funded basis the ranking is clear. In ASW to DESTR the DGB35 shows the best risk-adjusted number on the curve at 3.0 bp/risk whereas DGB28 is -5.7 bp/risk.

Against Germany the 35 is also the cheapest point on the nominal curve. The bond-bond spread to the nearest Bund is -14.5 bp, the least negative. On the DESTR/€STR asset swap the spread to Germany also peaks at the DGB35.

Marketing communication: This report has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Nordea Markets may have positions in the mentioned financial instruments. Some of the views and opinions expressed in this article are solely those of the author(s) and do not necessarily reflect the views of Nordea. corporate.nordea.com/article/104241/dgb-preview-dgb28-and-dgb35-wednesday

Foreign investors has through the recent months been increasing the share of the DGBS. Espeically in the DGB28 and DGB35.

There is a more subtle reason to consider the DGB35. In Bonds & bold: Don’t expect covered bullets to underperform and how to hedge a leverage position two weeks ago I showed that overlaying a leveraged covered-bullet book with 10-year Danish government bonds — repo funded against DESTR — improves carry and reduces tail risk in some scenarios. I will not repeat the analysis here but if you want to know more please use the link.

Marketing communication: This report has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Nordea Markets may have positions in the mentioned financial instruments. Some of the views and opinions expressed in this article are solely those of the author(s) and do not necessarily reflect the views of Nordea. corporate.nordea.com/article/104241/dgb-preview-dgb28-and-dgb35-wednesday