July 3, 2019 / 1:11 PM / 12 days ago

"Sad" milestone as all Danish government bond yields dip below zero

July 3 (Reuters) - Denmark has become the first developed economy in this year's global plunge in bond yields to have negative yields on all its government bonds, in what a senior official at its central bank called a milestone on a "slightly sad" global background.

The Nordic country, which was among the first to introduce negative rates in 2012, sold 10-year government bonds worth 1.72 billion Danish crowns ($260.40 million) at an interest rate of minus 0.32% at an auction on Wednesday, the central bank said. That marked a record low.

At the same time, the yield on 20-year bonds dipped to minus 0.03% on Wednesday, the bank said.

The Danish 20-year bond yield has flirted with 0% in recent sessions but pushed decisively into negative territory on Wednesday as bond yields across Europe fell sharply.

"There are simply no more Danish government bonds left with a positive yield," Thorsten Larsen, head of government debt management at the central bank said in a tweet.

"This certainly shows the continuing global economic challenges. A Danish milestone on a slightly sad background," he said.

Among the developed economies where central banks have negative interest rates, Denmark is the only country where the entire government bond yield curve is below zero tmsnrt.rs/2FOZDnR, according to Refinitiv data.

Denmark's longest-dated bond has a 20-year maturity, while other countries issue longer-dated bonds. In Switzerland, the 50-year bond is the only one with a positive yield.

"It is obviously historic, when the entire yield curve is negative. We have had very low rates for a long time, so this is quite a milestone," Danske Bank's chief economist Las Olsen told Reuters. "But it reflects the development we see in the rest of the world."

Rate-cut speculation across Europe has pushed government bonds deeper into negative territory. In the euro zone, where the European Central Bank already has a deposit rate at minus 0.40%, over half of government bond yields reached sub-zero rates in June.

"It is an intense development on the backdrop of ultra dovish signals from the big central banks, which now signal further rate cuts," chief analyst at Sydbank, Soren Kristensen, said in a note.

"It also shows how Denmark is a very attractive investor destination," he said.

Healthy public finances and a Danish economy free of big imbalances means investors see lending money to the Danish state as largely risk-free, he added. ($1 = 6.6064 Danish crowns)

Reporting by Nikolaj Skydsgaard Additional reporting by Dhara Ranasinghe and Jacob Gronholt-Pedersen Editing by Peter Graff

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