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On 10.10.2012, I have looked at the bond-rates and, both for Switzerland and Denmark, there is a discontinuity/spike at 1Y, as per below

Switzerland: ON= -0.09, 1W= -0.180, 1M= -0.230, 3M= -0.2, 6M= -0.01,

1Y= +0.250,

2Y= -0.124, 4Y= -0.077, 5Y= 0.060, etc (normal curve)

Denmark: 1M= -0.350, 2M= -0.300, 3M= -0.150, 6M= -0.150,

1Y= +0.320,

2Y= -0.028, 3Y= +0.114, etc (normal curve)

Could somebody hint why? They are no artificial rates (obtained by compunding with FRAs) but actually traded ones.

I mean the governmental bonds, which seemed to be "live" on Denmark http://www.forexpros.com/rates-bonds/denmark-government-bonds?maturity_from=10&maturity_to=290 for Denmark and http://www.forexpros.com/rates-bonds/switzerland-government-bonds?maturity_from=10&maturity_to=290 for Switzerland. Right now the charts links appear to be not working :(this is a window I used to have opened today)

Denmark - Government Bonds

Pair Yield Prev. High Low Chg. Chg. % Time

Denmark 1-Month -0.350 -0.350 -0.200 -0.350 0.000 0.00% 7:44:14

Denmark 2-Month -0.300 -0.120 -0.250 -0.350 -0.180 -150.00% 16:01:03

Denmark 3-Month -0.150 -0.150 -0.150 -0.200 0.000 0.00% 16:01:03

Denmark 6-Month -0.150 -0.150 -0.150 -0.200 0.100 -40.00% 10/10

Denmark 1-Year 0.370 0.370 0.370 0.200 0.050 15.62% 6:52:14

Denmark 2-Year -0.021 -0.021 -0.005 -0.040 0.011 36.36% 15:00:39

Denmark 3-Year 0.086 0.093 0.130 0.056 -0.007 -7.53% 18:10:46

Denmark 5-Year 0.289 0.290 0.319 0.264 -0.001 -0.34% 17:00:12

Denmark 8-Year 0.897 0.924 0.945 0.865 -0.027 -2.92% 18:21:17

Denmark 10-Year 1.540 1.541 1.552 1.483 -0.001 -0.06% 15:04:48

Denmark 15-Year 1.490 1.489 1.512 1.422 0.001 0.07% 18:23:15

Denmark 30-Year 2.143 2.166 2.176 2.101 -0.023 -1.06% 18:23:43

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I looked up these curves on Bloomberg and don't see the same discontinuity at 1Y for either. –  John Oct 10 '12 at 16:31
    
Hello @John, I have posted the values for Denmark that I am talking about. –  user7056 Oct 11 '12 at 18:29
    
Is the shape still there now? –  Phil H Oct 15 '12 at 14:34
    
Yes. There is definitely a pulling of the rate at 1 Y –  user7056 Oct 16 '12 at 15:39
    
Less demand for the 1year in Denmark because of the eurozone resque fund to come (anticipated/known few months in advance). Is Switzerland expected/going to issue 1Y positive bonds as well? Nov 27: The eurozone rescue fund opened books this morning via JP Morgan, Morgan Stanley and Natixis at guidance of 0.23% to 0.25% with pricing scheduled for later on Tuesday. The transaction will be rated A-1+/P-1/F1+, which are EFSF's short-term debt ratings. –  user7056 Nov 30 '12 at 11:19

1 Answer 1

http://uk.reuters.com/article/2012/11/27/efsf-bond-idUKL5E8MR6I220121127

Nov 27: The order book on the European Financial Stability Facility one-year syndicated issue is over EUR 5bn according to a bookrunner on the deal. The eurozone rescue fund opened books this morning via JP Morgan, Morgan Stanley and Natixis at guidance of 0.23% to 0.25% with pricing scheduled for later on Tuesday. The transaction will be rated A-1+/P-1/F1+, which are EFSF's short-term debt ratings.

The one year spike can be explained if it has been known few months in advance that eurozone large issue, with positive rates, was going to come, in one year eurobonds exactly, and not with longer maturities (Mario Draghi spoke in September about one up to three years).

Switzerland is staying positive for 1Y (the mass of EUR money was "parked") while Denmark became a bit negative for 1Y as well (there is still scepticisme regarding the 1Y-EUR with Denmark continued to be considered a better option that Switzerand, which is not in the European Union).

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