DENMARK - Pension funds seeking to improve their risk management snapped up Denmark's 4.5% 30-year bond auctioned this morning, executives said.
Bjarne Graven Larsen, chief investment officer of Denmark's largest pension fund, ATP told IPE his fund was one of a number of Danish pension funds to take part in the auction.
"The government decided very wisely to open a 30-year bond so that it is easier for the pension funds and the insurance industry to hedge their long term liabilities in Danish Kroner," said Larsen.
He added that the auction saw an issuance of close to DKK30bn (
Nationalbank announced the opening of the bond last week, arguing that it can be used "in the pension sector's risk management, in particular for hedging exposures related to the pension sector's liabilities".
Until now, the hedging of the pension liabilities was obtained via long dated Euro government securities and various types of derivatives primarily denominated in Euro.
The central bank said it intended to build up the bond to an outstanding of around DKK 60bn, though the outstanding would depend on market demand.
Nationalbank added that the strategy for issuing domestic government bonds remains to build up 10-year government securities every second year to a final outstanding of around DKK 50bn.
According to Larsen, ATP is currently looking how to best use its liquidity, and taking part in the auction was one of the ways to use its liquidity.
Last month, the pension fund injected around DKK 50bn into the Danish banking sector via government guaranteed deposits. (See earlier story IPE.com ATP pumps money into Danish banks)
Lasen said ATP could make more of these injections, but had nothing concrete planed yet.
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