In the land of negative rates, yet another record has been set
(Reuters – COPENHAGEN) – Interest rates in Denmark’s mortgage bond market, one of Europe’s largest, are hovering around their lowest ever levels due to strong international appetite for the top-rated bonds.
30 year fixed for 1.5%
The country’s largest mortgage lender Nykredit on Friday began issuing 30-year mortgage loans with a fixed rate of just 1.5 percent, revisiting a 2015 record-low.
“The low risk of these triple-A rated papers combined with interest rates of 1.5 to 2.0 percent is attractive in international comparison,” chief analyst Jeppe Borre of Totalkredit, a unit of Nykredit, said.
“Therefore we’ve seen foreigners increase their share of ownership in these bonds significantly”.
Most European bonds have rallied over the past month after the European Central Bank extended asset purchases until September 2018 and left it open-ended beyond that.
Investors are paying Danes to finance negative rates
Danske Bank, the second-largest mortgage lender, on Friday concluded the latest batch of auctions over ‘flex-loans’, one-year adjustable rate-loans, with an interest rate of negative 0.20 percent, the lowest ever for that bank.
“The economic developments in Denmark and Europe are pushing interest rates to these extremely low levels. It looks as if it will continue for some time to come,” senior economist Sonia Khan of Danske Bank’s mortgage unit Realkredit Danmark, said.
Some investors may also be choosing to place their money in Danish bonds rather than German ones due to the political uncertainty stemming from the prolonged coalition talks in Berlin, Khan added.
The main owner of Nykredit late on Thursday decided to go ahead with the sale of a 10.9 percent stake to five pension funds, putting an end to plans to publicly list the company.