Explaining the Danish-German sovereign yield spread

Economic Memo - June 2022 - No. 7

Authors Grønlund, Asger Munch; Hensch, Jonas Ladegaard; Thinggaard, Simon Hetland
Subject Monetary policy; Government bond; Yield spreads; Duration; Financial markets
Type Economic Memo
Year 2022
Published 1 June 2022
Abstract icon This economic memo investigates the drivers of the Danish-German 10-year yield spread, which has widened 25 basis points since January 2020. The widening is found to be driven mainly by larger collateral scarcity of German sovereign bonds due to the ECB’s significant bond purchases and a substantial increase in duration on callable Danish mortgage bonds.