DGB preview: DGB28 and the DGB35

The DGB35 is the more attractive of Wednesday’s two Danish government bond offerings because it combines better relative value with stronger demand from the upcoming index-duration extension.

• Danish government bonds have performed well through 2026, although September data showed some profit-taking by domestic and foreign investors; Nordea nevertheless sees continued value because of their safe-haven characteristics.
• On a hedged-and-funded basis, the DGB35 offers 0.5bp of pickup per unit of risk in ASW to DESTR, matching the DGB52, while the DGB28 offers -12.9bp/risk.
• Versus Germany, the DGB35 is the cheapest point on the nominal curve: its spread to the DBR35 is -16.2bp, the least negative on the Danish curve, and its DESTR/€STR asset-swap spread also peaks around that maturity.
• Foreign investors cut their DGB holdings by DKK 2.5bn in September, reducing their share by 0.7 percentage points to 39.2%; selling was concentrated in DGB35 at DKK 1.6bn and green DGB33 at DKK 0.9bn.
• When DGB27 leaves the Danish government index at the end of November, the index’s modified duration is expected to rise from 7.41 to 8.18, while DGB35’s weight including the green bond increases from 14.3% to 16.1%, compared with 7.1% to 8.0% for DGB28.

Takeaway: Nordea prefers DGB35 and remains neutral on DGB28, arguing that the auction offers an opportunity to position for the index rebalancing and duration demand, while acknowledging that further risk-off conditions and debt-market focus could support Danish government bonds.