Danish Harbour

Not at all surprising considering Danske bank and the other Danish banks, which seem to be in trouble.

Effective as of tomorrow June 1st.

.                                         May 24th May 25th June 1st

Deposit interest rate
One week                            0.3%      0.2%       0.15%
day-day .05 lower

Lending rate                        0.7%      0.6%       0.45%

Base rate for loans
in banks.                              0.75%    0.75%     0.25%

CB announces they have instruments to deal with negative interest rates.
There has been CB intervention in the currency market.

The declining interest rates on sovereign bonds the month has made
this second intervention within a week quite expected.

Indubitably a certain pressure on the DKK has been in force as a
flight from the Euro – or rather Spanish securities is in evidence –
has also been seen in the interest rate on German sovereign bonds.

The statement from the Danish CB makes it clear that the DKK will be
defended with negative interest rates – if needed. A Danish
appreciation is to be avoided.

What the more thoughtful pundits should have noticed the
disproportionate drop in interest rate on 10 year sovereign bond.

The low interest rates has since the beginning of the year lead to
conversion of high fixed interest real estate loan into partly new,
but lower interest rate loans – also some fixed interest rate
annuities; but apparently also into variable interest mortgages.

Problem is that (even according to Moody’s) these variable interest
mortgages are junk. So no buyer except issuers – investors the fly
into long sovereign bonds.