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Derivatives market: Swaps sizzle on call for Danish ALM change

Asset managers, pension funds and derivatives specialists across Europe need to be aware of the potential changes in Danish ALM activity. Several Danish pension funds and life insurers have written to the Danish Financial Services Authority, suggesting that they be allowed to change their discount curve for liabilities from Danish government bonds. We discuss the implications for the EUR and DKK fixed income markets.

A version of this article first appeared in Total Derivatives.

Total Derivatives is the prime source of real-time news and analysis of the global fixed income markets. Danish life and pension funds suggest changing discount curve

The Eurozone and Danish swap markets are abuzz with talk of potential major changes in Danish ALM activity.  In early January several Danish pension funds and life insurers wrote to the Danish Financial Services Authority, suggesting that they be allowed to change their discount curve for liabilities from Danish government bonds (plus a spread) to Danish swaps. Danish swap market sources and Danish pension fund sources see a “good” or “pretty likely” chance that the regulator will act on the suggestion.

The Danish FSA will consider industry demands for a change in the discount rate that is used for the calculation of pension fund liabilities, the regulator's deputy director Per Plougmand Bærtelsen told Total Derivatives.

“The industry has sent a proposal that we will look at. But it is too early in the process to say when we will give a response,” Bærtelsen said.

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