If the Danish budget proposal and debt management strategy for 2019 released today is agreed, it would flush the DKK money market with liquidity next year.
Danmarks Nationalbank would then likely need to buy DKK to sterilise this effect and avoid excessive DKK depreciation.
In turn, we raise our 6M and 12M EUR/DKK forecasts to 7.4550 (from 7.4525 and 7.4475) to reflect this risk.
Overall, we see the jump in banks' net position and modest DGB issuance in 2019 as positive for Danish fixed income.
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