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20-Year Mortgages Hit Zero for First Time in Danish Rate History

Bloomberg logoBloomberg 8/7/2019 Frances Schwartzkopff

(Bloomberg) -- In Denmark’s $495 billion mortgage-backed covered bond market, another milestone was reached on Wednesday as Nordea Bank Abp said it will start offering 20-year fixed-rate loans that charge no interest.

The development follows an announcement earlier in the week by Jyske Bank A/S, which said it will start issuing 10-year mortgages at a coupon of minus 0.5%. Danes can also now get 30-year mortgages at 0.5%, and Nordea recently adjusted its prospectus to allow for home loans up to 30 years at negative interest rates.

Danish 10-year government yield breaches minus 0.5%© Bloomberg Danish 10-year government yield breaches minus 0.5%

“It’s never been cheaper to borrow,” Lise Nytoft Bergmann, chief analyst at Nordea’s home finance unit in Denmark, said in an email. “We expect this to contribute to driving home prices higher.”

Though good news for homeowners, Bergmann said the development is “almost eerie.”

“It’s an uncomfortable thought that there are investors who are willing to lend money for 30 years and get just 0.5% in return,” she said. “It shows how scared investors are of the current situation in the financial markets, and that they expect it to take a very long time before things improve.”

Read More About Negative Rates

Negative Rate World Encourages Unusual Ways to Play Yield Curve10-Year Notes at Negative Coupons Hit Covered-Bond MarketInvestors in $480 Billion Market Gird for 30 Years of Sub-ZeroDanske Crisis Exposes Full Extent of Negative-Rate Damage Negative 20-Year Yields Now a Reality in Danish Bond Market 

NOTE: Realkredit Danmark said on Aug. 2 that it would open a 0.5%, 30-year bond, while Nykredit opened new 30-year, 0.5% on Aug. 5

To contact the reporter on this story: Frances Schwartzkopff in Copenhagen at fschwartzko1@bloomberg.net

To contact the editors responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net;Christian Wienberg at cwienberg@bloomberg.net

For more articles like this, please visit us at bloomberg.com

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