Anders Skytte Aalund’s Trading Strategy team has a strong focus on opportunities in the Danish bond market. Its unique features have helped the Danish bond market weather recent market turmoil and attract investors.
“It is a very big market, it is a very liquid market, and there is a lot of turnover going on,” says Aalund, Head of Trading Strategy and Director in Nordea Markets.
Aalund points to many interesting developments in the bond market overall in recent years, including the dominance of US MBS-style callable bonds, which have grown in size in the last six to eight years. However, the recent steepening of the yield curve has changed the dynamic in the market, he notes.
Borrowers are preferring more short-term frequencies, leading to a market that’s more dominated by short-term bullet bonds and floating-style bonds.
“This is super interesting because it changes the dynamic of the market. Both in terms of the way it is being priced, but also on the way the liquidity is moving,” Aalund adds.
One key aspect of the Danish bond market is the fact that borrowers can buy back their debt.
“This has always been the case and is quite unique for the market. But since we have seen the steepening of the yield curve and bond prices decreasing significantly, this has been a golden opportunity for the borrowers to actually reduce their debt level.”
This is also a good opportunity for investors in several ways.
“Because what is going on when this happens?” Aalund asks rhetorically.
Find out in the video below.