In November 2020, Danmarks Nationalbank assumed responsibility for the new reference rate Denmark Short-Term Rate (DESTR)from Finance Denmark. Similar reference rates are managed by central banks in other countries. Reference rates are used in a wide range of financial contracts, including bank loans, mortgage bonds and interest-rate swaps. Thus, it is important for Danmarks Nationalbank and the financial system in Denmark that a short-term transaction-based reference rate is introduced in Danish kroner in line with international standards.
In June 2021, Danmarks Nationalbank published a report with an evaluation of the data and methodology behind DESTR, cf. DESTR – Review of Underlying Data and Methodology.
The DESTR methodology was first presented in a public consultation by Finance Denmark in May 2019, when a working group commissioned by Finance Denmark had developed a new reference rate in Danish kroner based entirely on O/N-deposit transactions. The consultation suggested a new reference rate similar to the euro short-term rate (€STR) of the European Central Bank (ECB). The consultation showed a broad support for the new reference rate among market participants and Danmarks Nationalbank.
The new evaluation is based on a collected dataset covering the period March 2017 to April 2021. The collected data shows that O/N-deposits remain the most suitable segment for calculating a new transaction-based reference rate in Danish kroner, and that the proposed calculation methodology based on a volume-weighted 12.5 per cent trimmed mean remains valid for the Danish market. Thus, the main conclusions drawn from the public consultation in 2019 are unchanged.
A time-series for pre-DESTR covering March 2017 to April 2021 is available here (link). When the daily collection of statistical data begins pre-DESTR will be updated on a continuous basis until DESTR is published for the first time. The plan is for the daily collection of statistical data to start on a trial basis in the 2nd half of 2021.