National Bank of Greece ADR (fka NBGGY)

[Jester_Vandalay]

Denmark’s Biggest Pension Fund Says Won’t Touch Peripheral Debt

Jan. 5 (Bloomberg) -- Denmark’s biggest pension fund, ATP, said it won’t touch government bonds issued by the European Union’s most indebted nations as it deems the risk too great.

“We invest in government bonds in order to purchase interest-rate risk, whereby we try to avoid credit risk entirely,” said Lars Rohde, chief executive officer at ATP, which is based north of Copenhagen, in an e-mailed reply to questions today. “This means that we for a long time have completely avoided government debt issued by Greece, Ireland and so forth; our European government bond holdings only include Danish, German and, to a lesser degree, French bonds.”

Though the single currency shared by 17 European Union nations is likely to survive, a few of the region’s members will probably have to restructure their debts, according to Harvard University Professor Kenneth Rogoff. Euro-region leaders last month agreed to amend the bloc’s treaties to put in place a permanent crisis mechanism in 2013 to contain future debt shocks. That mechanism won’t address existing budget stresses faced by countries including Portugal and Spain.

“When we invest in government bonds, it’s absolutely critical for us that there can be no doubt that we’ll get our money back,” Rohde said.

ATP, which at the end of the third quarter had a total investment portfolio of 397.2 billion kroner ($70.3 billion), delivered a return on total assets of 5.7 percent in the first nine months, it said in its quarterly report on Oct. 28.

Rescue Packages

Greece, which received a 110 billion-euro ($146 billion) loan from the European Union and International Monetary Fund in May after it struggled to repay its debts, will this year post a 7.4 percent budget deficit of gross domestic product, compared with a 9.6 percent shortfall in 2010 and a 15.4 percent gap the previous year, the European Commission said on Nov. 29.

Ireland, which received an 85 billion-euro rescue package last quarter, will this year post the widest deficit in the EU at 10.3 percent of GDP, following 2010’s 32.3 percent, according to the commission.

The euro lost 0.7 percent against the dollar to trade at 1.3219 at 1:03 p.m. in London. The currency has declined 7 percent since a Nov. 4 high.

The additional yield investors demand to hold 10-year Greek government bonds instead of benchmark German bunds widened to a record today. The difference in yield, or spread, reached 974 basis points as of 10:54 a.m. in London, the most on record, according to data compiled by Bloomberg.

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