It should be emphasised that this facility did not affect the foreign-exchange reserve or support the krone directly. It supported the krone indirectly by calming the market for FX swaps; and the ECB’s backing sent a strong positive signal to the market. Issuance of 30-year government bonds was another key factor.
There was extensive demand in the Danish market for domestic bonds with longer maturities – particularly on the part of pension funds, which needed to hedge their long-term commitments. In November and December 2008, the Danish government took the extraordinary step of issuing 30-year bonds. As a result, Danish pension funds restructured their portfolios from foreign to domestic securities. This supported the krone.