Denmark Continues T Bill Auctions on Easing of Kroner Peg to the Euro

The Danish Government recommenced public sale of Treasury bills as pressure on the kroner’s ceiling to the single currency eased. The website of Denmark’s central bank published an announcement that DKR 100 million worth of T-bills due this June 1st were auctioned at a yield equal to (negative) 0.9 percent.

Meanwhile, DKR 1 billion for September 1 were sold at a yield equal to (negative) 0.75 percent. This may be an indication that severe pressure on the kroner’s cap to the euro has gone down even as negative profit would have been anticipated following the decision of the central bank to fix negative benchmark rates in July of 2012.

The central bank used up billions of dollars to defend the ceiling. Speculators presumed that this would be removed after the Swiss National Bank removed its cap versus the euro last January.

It pushed down the deposit rate further forcing the government to put on hold bond sales and intervened assertively in FOREX markets in answer to this assumption. Foreign reserves increased to a record high.

Earlier in March, an economic team from Goldman Sachs helped alleviate speculations stating that Denmark has the capability to defend the shared currency’s peg.