Governor Per Callesen’s panel presentation at the Danish Economic Society’s member meeting

On 1 December, Governor Per Callesen participated in a panel debate on the housing market. The presentation argues for why and how the structures in the housing market should be strengthened, specifically through a requirement that highly indebted homeowners repay their debt and through a reduction of the tax deduction for interest payments. (The presentation is in Danish only)

Working Paper: Firm financing and public support measures during the pandemic

This paper studies Danish firms' debt financing decisions during covid-19 with a focus on the impact of government support measures. Credit growth has been modest during the pandemic. Public liquidity measures such as deferred tax and VAT payments served as a substitute for more traditional debt funding sources.

Nonbanks, credit provision and the transmission of monetary policy in Denmark

We analyse the role of nonbank lenders in corporate and consumer credit markets in Denmark and show that they affect the transmission of monetary policy to financial and real outcomes. Nonbanks increase their share of credit supply after an interest rate hike in both the consumer and corporate credit markets.

Foreign ownership of 30-year mortgages declines

Foreign investors' holdings of 30-year fixed-rate callable mortgage bonds have declined from 41 per cent to 37 per cent since mid-2020. The decline is counteracted by the fact that their ownership share of other fixed-rate callable mortgage bonds has increased from 17 per cent to 20 per cent in the same period.

Corporate deposits exceed bank debt

At the end of October, Danish companies had deposits for kr. 467 billion in the banks. At the same time, they had bank debt for kr. 435 billion. The deposits thereby exceed the debt by kr. 32 billion. This continues the trend since May 2020, where the deposits exceeded the debt for the first time.

Governor Lars Rohde's speech at the Distinguished Speakers Seminar

At the conference convened by the European Economics and Financial Centre on 23 November 2021, Governor Lars Rohde shared his thoughts on why the Danish economy has fared relatively well through the pandemic so far. The Danish economy is now operating above its potential, and is expected to find a balanced trajectory over the coming years, as current pressures are believed to be partly transitory.

Assistant Governor Thomas Harr's panel speech at Danske Bank's Summit 2021

On 23 November, Assistant Governor Thomas Harr participated in a panel discussion on the covid-19 recovery, fiscal and monetary policy and the outlook for inflation. In the presentation, it is argued that there are large differences between the US and the euro area, while Denmark is a special case. Inflation expectations and wage developments will be the key determinants of inflation in the coming years – both in Denmark and abroad.

Governor Lars Rohde's speech at the PwC Banking seminar

On 22 November, Governor Lars Rohde gave a presentation at the PwC banking seminar (PricewaterhouseCoopers) 2021. The presentation was about the current state of the Danish economy and the Danish banking sector. The Governor also pointed out signs of risk build-up in the financial system and the need to improve the resilience of the housing market. Moreover, the Governor addressed the European Commission's proposal for revised capital requirements, which offers several improvements.

The Faroese Economy – The boom has regained momentum

The Faroe Islands are experiencing widespread labour shortages, due to very low unemployment and an already high labour market participation rate. At the same time, the continued boom is supported by improved export prospects. Long-term fiscal planning will improve the resilience of the Faroese economy. Capital should be set aside in good times to draw upon in bad. With the ageing of the Faroese population, balance between expenditure and revenue is also important.

The reference rate DESTR will be launched on 1 April 2022

​Danmarks Nationalbank starts publishing DESTR, Denmark Short-Term Rate, on 4 April 2022. The first publication will reflect trading activity on 1 April 2022. Thus, DESTR will be available for use in financial contracts with effect from 1 April 2022.

Statement by Danmarks Nationalbank in connection with COP26

Climate change and the transition to a green economy can challenge Danmarks Nationalbank's objectives of price and financial stability. Danmarks Nationalbank publishes a statement on its climate-related work, in connection with COP26. Danmarks Nationalbank increased the work upon joining the Network for Greening the Financial System in 2019.

Greenlandic economy - Booming economy and severe labour shortages

Greenland has fared better than most countries in weathering the covid-19 pandemic. Labour shortages are severe, and the risk of overheating of the economy has increased. Nuuk is experiencing the strongest labour market pressures, while South and East Greenland are experiencing the lowest. Large-scale infrastructure investments will cause debts of the government of Greenland, local government and government-owned companies to grow considerably over the coming years.

Foreign Exchange and Liquidity and Monthly Balance Sheet, October 2021

​In October 2021, the foreign-exchange reserve decreased by kr. 9.8 billion to kr. 491.9 billion. For settlement in October, Danmarks Nationalbank's net purchase of foreign exchange due to intervention in the foreign-exhcange market amounted to kr. 1.5 billion.

Limited interest-rate sensitivity amongst homeowners

The interest-rate sensitivity of Danish homeowners has decreased in the period from 2009 to 2019. These are among the conclusions of a new Working Paper in which Stine Ludvig Bech, Simon Juul Hviid og Jakob Guldbæk Mikkelsen from Danmarks Nationalbank have analysed, how homeowners will be affected by an interest-rate increase.

Working Paper: Measuring household interest-rate sensitivity in Denmark

We evaluate homeowners’ interest-rate sensitivity on cash flows and balance sheets of a 1 percentage point increase in interest rates. Overall, the interest-rate sensitivity is limited. However, for a subgroup of homeowners, an increase in interest rates will have a substantial effect on their cash flows and balance sheets.

Card payments in physical stores are back

Since the last reopening, Danes have returned to shopping in physical stores. This can be seen in the card turnover, which in the second quarter of 2021 was back at the pre-corona level. While card turnover in physical stores have been negatively affected by the closures, it has performed better in e-commerce.

Major stock buys via funds

In the first three quarters of 2021, private Danish investors have purchased more investment fund shares than in the past three years combined. In a year with rising stock markets and negative deposit interest, they have so far invested kr. 30 billion in investment funds, while they invested kr. 26 billion in the years leading up to 2021.

Growing foreign ownership of Danish shares

The value of foreign investors' holdings of Danish listed shares has increased by kr. 412 billion since the turn of the year to kr. 2,453 billion. Most of the increase is due to increases in value, but foreign investors also bought Danish shares for kr. 42 billion. The foreign investors’ ownership in listed Danish shares has thus increased from 55 per cent at the turn of the year to 57 per cent in September.

Danes are buying foreign shares like never before

Overall, private Danish investors have bought foreign shares and foreign investment fund shares for approximately kr. 40 billion since January 2020. Such large purchases of foreign shares etc. from private Danish investors have not been seen before. The purchases coincide with the fact that the banks have introduced negative deposit rates and the fact that the Danes have had their frozen holiday money paid out. In the first three quarters of 2021 alone, the purchase was approx. kr. 20 billion. This is on a par with the current record for the entire year 2020.

Working Paper: Corporate Investment and Cash Holdings under Financing Shocks

I analyze to which extent corporate cash holdings protect firms from the adverse consequences of shocks to their borrowing costs. Despite firms self-insuring against spikes in their borrowing costs by holding cash, an aggregate shock to borrowing conditions similar to that seen during the Global Financial Crisis can significantly contract aggregate investment, especially for firms with low cash holdings.

Deposit rate for danes continues to fall

In September 2021, the average rate on Danish private customers' ordinary deposits was -0.31 per cent per annum. This corresponds to the Danes paying kr. 65 million in interest on their ordinary deposits in September. Recently, several of the larger banks have lowered their deposit rates from -0.6 per cent to -0.7 per cent, which is expected to lower the average deposit rate further in the coming months.

Flood risk discounts in the Danish housing market

We investigate the effects of the risk of flooding on the prices of single-family homes in Denmark. Houses that are exposed to flood risk today, as well as houses that will be exposed to flood risk in the future due to rising sea levels, are priced at a discount.

Danmarks Nationalbank's comments on the Danish Economic Council's discussion paper, autumn 2021

Danmarks Nationalbank's gold – a historical overview

There is still public interest in Danmarks Nationalbank's gold stock, although it has been many years since gold played an important role in the cash system and more generally in monetary and foreign exchange policies. The analysis provides an overview of the historical background of the gold stock based on source material from Danmarks Nationalbank's archives at the Danish National Archives.

Danmarks Nationalbank's gold

Danmarks Nationalbank has around 66.5 tonnes of gold. A new analysis provides a general overview of the historical background for Danmarks Nationalbank's gold stock based on source material from Danmarks Nationalbank's archive at the Danish National Archives.

Loan demand from private customers is flattening

In Danmarks Nationalbank’s lending survey for 3rd quarter 2021 a few of the banks and mortgage institutions report that loan demand from private customers – after a longer period with growth – decreased a bit from 2nd to 3rd quarter 2021. The institutions mention, among other things, less activity in the housing market as a possible explanation of the development. At the same time, almost all the institutions expect that the demand from private customers will be unchanged in 4th quarter as regards loan demand from both existing and new private customers.

Assistant Governor Thomas Harr's panel speech at Danish Finance Institute Annual Conference 2021

On 7 October, Assistant Governor Thomas Harr participated in a panel discussion on where interest rates are heading and the implications. The presentation argues that interest rates can be expected to remain low going forward. Moreover, the presentation discusses how negative interest rates have affected households, firms and banks so far.

FDI abroad reached its highest level in 2020

Denmark's foreign direct investments (FDI) abroad (outward) amounted to kr. 1,505 billion. This is shown in Danmarks Nationalbank's annual stock statistics for FDI, which are published today. It is kr. 31 billion more than in 2019. Among other things, the Ørsted Group has made significant investments abroad in 2020.

Governor Lars Rohde's speech about the housing market situation at the Association of Danish Mortgage Banks' theme day

At the theme day of the Association of Danish Mortgage Banks, Lars Rohde addressed the housing market situation. He reiterated Danmarks Nationalbank's recommendations on the Danish housing market. Housing market resilience can and should be strengthened. One way of doing so is by restricting loans with deferred amortisation to the most resilient homeowners.

Foreign Exchange and Liquidity and Monthly Balance Sheet, September 2021

​In September 2021, the foreign-exchange reserve increased by kr. 18.4 billion to kr. 501.7 billion. The increase reflects Danmarks Nationalbank's net purchase of foreign exchange for kr. 23.5 billion, and the central government's net repayment of foreign debt for kr. 5.1 billion, cf. table 1.

Public consultation on the transition from Tom/Next to DESTR

On behalf of the working group on short term reference-rates Danmarks Nationalbank publishes a public consultation on the proposed transition from the Tom/Next reference rate to the new Danish reference rate DESTR.

Interest rate reduction

​Effective from 1 October 2021, Danmarks Nationalbank's current account rate, interest rate on certificates of deposit and lending rate is reduced by 0.10 percentage point.

IIP is mainly driven by the balance of payments

Denmark's international investment position (IIP) has almost regained what it has lost since the major price and exchange rate changes in 2020. It is primarily the persistent surpluses on the balance of payments that have contributed, and the IIP amounts to kr. 1,759 billion at the end of the 2nd quarter of 2021. In popular terms, this corresponds to the net wealth abroad being kr. 360,000 per adult Dane.

Danes invest over half of their available funds

In the past year, Danish households have made good returns on rising global stock markets. At the same time, the low interest rates have increasingly been reflected in the form of negative deposit rates for private customers. These factors have contributed to households over the past year investing more than half of their available funds in investment certificates or directly as purchases of stocks and bonds.

Foreign banks dominate the Danish money market

Foreign banks are active in the market for borrowing and lending between banks, which is a market with a total daily turnover of kr. 72 billion. More than two thirds of the borrowing and lending of domestic banks in the money market is with foreign banks. This is evident from Danmarks Nationalbank's yearly money market survey, which covers the turnover in deposits and interest rate derivatives among the banks during Q2.

Green bonds are growing

Companies are utilising new opportunities for green mortgage finance in Denmark. This means that green mortgage bonds have risen to kr. 43 billion and amounts to 1.3 per cent of the Danish mortgage bonds. In addition to Danish mortgage banks, Danish companies also issue green bonds. In total, Danish green bonds amount to kr. 109 billion at the end of August 2021.

Governor Signe Krogstrup's panel speech at BSP-RBWC International Research Conference

Governor Signe Krogstrup participated in a panel discussion on central banking and dealing with the enduring impact of covid-19 on 27 September 2021. The presentation argues that interest rates may stay low for an extended period, and that macro prudential policy therefore may be relevant.

Mortgage debt in the big cities is younger

Major conversions, restructuring and a busy housing market have meant that more than half of the Danes' current mortgage debt has been paid off within the past two years. The age of the debt, like the interest rate level, has an effect on how large the instalment payments are on the part of the debt that is repaid. This is because mortgage loans with instalments are typically annuity loans, where installment payments make up a smaller part of the payment at the beginning of the loan's life.

Outlook for the Danish economy - The economy heading back towards a moderate boom

Rapid recovery after the lockdowns has resulted in recruitment difficulties for companies. Economic growth is expected to continue, with the economy moving into a moderate boom. Bottlenecks are not expected to develop into an actual overheating of the economy, but several prerequisites are present for a scenario with significantly stronger growth. The Government should therefore be prepared to tighten its economic policy more than planned.

Rapid recovery increases pressure in several parts of the Danish economy

​The Danish economy is heading back towards a moderate boom after strong growth in the wake of the reopening of the economy in the spring. In a new projection for the Danish economy, Danmarks Nationalbank estimates that the gross domestic product (GDP) will increase by 3.8 per cent this year. In 2022 and 2023, GDP is expected to increase by 3.1 per cent and 2.4 per cent, respectively.

Monetary and financial trends - Accommodative financial conditions strengthen the upswing

The recovery of the western economies has contributed to higher corporate earnings in Denmark and higher equity prices. Danish long-term bond yields have edged up slightly since March, but remain low. Overall, financial conditions are accommodative for the growth in GDP.

The pension sector's alternative investments

The pension sectors alternative investments of kr. 500 billion have provided diversification and stable returns. Most companies have room to invest even more in alternatives if deemed appropriate in terms of risk and return. An increased share of alternatives can impact both solvency and liquidity, where especially liquidity can become tight if e.g. interest rates increase. Strong management of short- and long-term risks is thus important.

Working Paper: Government spending and retail prices: Regional evidence from the United States

In this Working Paper, I study the effects of local government spending on local retail prices using retail scanner data from the United States. Estimates show that retail prices increase following an increase in government spending. I provide evidence which indicates that this cannot be accounted for by changes in marginal costs.

Governor Per Callesen’s presentation at Finance Denmark’s Director’s Conference 2021

On 6 September, Governor Per Callesen held a presentation at Finance Denmark’s Director Conference 2021. The presentation describes the current situation for the Danish economy. The presentation also includes the decision of the Minister for Industry, Business and Financial Affairs to raise the countercyclical buffer and describes negative interest rates and the phase-out of government liquidity support. (The presentation is in Danish only).

New ECB strategy and the Danish economy

The ECB's new monetary policy strategy was published on 8 July 2021. The analysis presents the changes and their potential impacts on the Danish economy. ECB's new monetary policy strategy does not influence the way in which Danmarks Nationalbank conducts monetary policy. Overall, the changes are assessed to have small potential positive impacts on the Danish economy.

Background seminar on new digital retail payments

Danmarks Nationalbank held a seminar on new digital retail payments September 3, 2021, where Head of Payment Systems, Nathalie Pauline Tuxen, inter alia elaborated on cryptoassets, stablecoins and CBDC (Cental Bank Digital Currencies) and their mutual similarities and differences. (The presentation is in Danish only).

Bonds account for less in pension investments

The insurance and pension sector’s total investments consist of fewer bonds than before. Since the corona lock down in March 2020, the share of bonds in the portfolio has decreased from 58 per cent to 51 per cent in June 2021.

Foreign Exchange and Liquidity and Monthly Balance Sheet, August 2021

​In August 2021, the foreign-exchange reserve increased by kr. 24.8 billion to kr. 483.4 billion.

Assistant Governor Thomas Harr's panel speech at the conference “The Long-run Outlook for Interest Rates”

Assistant Governor Thomas Harr participated in a panel discussion on 1 September 2021 on how long-term interest rates influence economic policy discussions in Denmark. The presentation argues that Danish long-term interest rates are likely to remain low for some time, but the fixed exchange rate regime constrains how expansive a fiscal policy pursued over time can be.

Governor Lars Rohde's speech on ultra low interest rates at the conference "Long run outlook for interest rates"

At the conference on 1 September 2021, Governor Lars Rohde addressed the very low interest rates that characterise a large number of countries, including Denmark. He argued that they are driven by a number of global factors. They have implications for households, companies as well as financial institutions.

How cyber resilient is the Danish financial sector?

Key financial sector participants have strong external defences and have improved their capability to detect and respond to cyber attacks. Increased focus is required on the protection of critical data and the capability for safe and effective recovery of core systems. This is demonstrated by Danmarks Nationalbank's cyber resilience surveys.

Increase in 30-year mortgage bonds with 1.5 per cent interest rate

The total value of 30-year fixed-rate mortgage bonds with a coupon interest rate of 1.5 per cent reached its highest level ever in July with kr. 165 billion. However, bonds with a coupon rate of 1 per cent still dominate with a total value of kr. 641 billion.

Fixed rate on increasing part of corporate debt

Danish companies have increased the share of their bank and mortgage debt with fixed interest rates over a number of years. It now accounts for 28.9 per cent of their total bank and mortgage debt of DKK 1,727 billion, against 19.3 per cent in 2014. Fixed-rate loans amount to DKK 499 billion, of which 41 billion are bank loans.

New general SDR allocation increases Danmarks Nationalbank's foreign-exchange reserve

​A new general allocation of Special Drawing Rights, SDRs, from the International Monetary Fund, IMF, becomes effective on 23 August. The SDR allocation is equivalent to 650 billion dollars. Denmark will receive SDR 3.3 billion, equivalent to approximately kr. 30 billion. Denmark's SDR holdings are included in Danmarks Nationalbank's foreign-exchange reserve, which therefore increases by approximately kr. 30 billion with the allocation.*)

Digitalised economies have performed better during the pandemic

The pandemic has accelerated the digital transition in many countries. This Economic Memo finds that the degree of digitalisation has had an impact on the magnitude of economic losses during the pandemic. Differences in the EU countries' objectives for digital transition can imply greater digital inequality in the future and a deeper economic gap between the countries. (Memo available in Danish only).

Three lessons from the Danish wage compensation scheme

This memo aims to take the first steps in analysing the use of the wage compensation scheme in Denmark and its effectiveness to preserve job matches. We find that firms used the furlough programme extensively to save at-risk workers. This focus has been particularly on saving full-time workers and workers with higher tenure.

Foreign Exchange and Liquidity and Monthly Balance Sheet, July 2021

​In July 2021, the foreign-exchange reserve increased by kr. 0.2 billion to 458,6 billion. In July, Danmarks Nationalbank's net purchase of foreign exchange due to intervention in the foreign-exchange market amounted to kr. 5.2 billion.

Large-scale purchase of investment fund shares

Danish households' purchase of Danish investment fund shares is gaining momentum. Since August 2020 alone, households have purchased kr. 32 billion worth of investment fund shares.

The Danes’ deposit rate averaging -0.21 per cent

In May 2021, the average interest rate on Danish private customers’ ordinary deposits was -0.21 per cent per annum. The deposit rate has thus decreased 0.14 percentage points in 2021. The large decrease in the average rate must be seen in light of the fact that the share of private customers’ deposits with negative rate increased from 13 per cent to 30 per cent in the same period. This corresponds to kr. 310 billion of the Danes’ total deposits earning negative interest in May 2021.

New ECB monetary policy strategy does not alter Danmarks Nationalbank's monetary policy

Banks report lower losses and loan impairments

In Danmarks Nationalbank's lending survey for the 2nd quarter of 2021, almost half of the 17 banks surveyed report a decrease in the share of loan impairments and losses from the first to the second quarter. This is the case for both private and corporate customers. The decrease is in contrast to the banks' responses in the first quarter, where they expected the losses to remain unchanged.

Foreign Exchange and Liquidity and Monthly Balance Sheet, June 2021

​In June 2021, the foreign-exchange reserve increased by kr. 2.5 billion to 458.4 billion. In June, Danmarks Nationalbank's net purchase of foreign exchange due to intervention in the foreign-exchange market amounted to kr. 2.6 billion.

3 month extraordinary loans are no longer offered

Housing market robustness should be strengthened

The pandemic has led to high trading activity and house price increases. This creates extraordinary uncertainty about future house prices. By the end of 2023, house prices are expected to have risen significantly. Measures are needed now, such as increased amortisation requirements and lower interest deductions that can strengthen the robustness of the Danish economy – both now and in the future.

Climate change and the role of central banks

For the first time, Danmarks Nationalbank takes an overall stand on its role in relation to climate change and the transition to a green economy. Climate change and the transition may pose challenges to the objectives of price and financial stability. Central banks have a task in adapting to the new challenges.

Danmarks Nationalbank’s comments on media reports about SolarWinds

The allegations about Danmarks Nationalbank was hacked and a back door to IT systems was open for 7 months are not correct.

Consistent recovery and resolution of small and large banks in Europe

In 2014, the EU adopted a new framework for recovery and resolution in order to sever the tie between banks and government, so that the taxpayers no longer had to pick up the tab for failing banks. In Denmark, the framework for recovery and resolution constituted a minor innovation because Denmark already had a framework ensuring that the creditors of failing banks absorbed losses. The European framework is still evolving. The Danish experiences are useful in a European context.

The Danes' net financial wealth is highest in the EU

Danish households' net financial wealth was kr. 6,453 billion at the end of 2020. Net financial wealth is the difference between households' financial assets (e.g. pensions and deposits) and liabilities (debt) and corresponds to kr. 1.3 million per Dane. In the EU, the average Dane's financial net wealth is currently in first place, followed by the Netherlands, Sweden, Luxembourg and Belgium. The EU-average is approximately kr. 450,000.

International investment position back to pre-corona level

Denmark's international investment position (IIP) took a big dive in 2020, but has increased by kr. 170 billion since the beginning of the year and amounts to kr. 1,765 billion at the end of the first quarter of 2021, corresponding to 77 per cent of GDP. Denmark's IIP is thus back to the pre-corona level.

Working Paper: Securitization and House Price Growth

From 2000-2006 US house prices and mortgage credit grew while the relative cost of mortgage credit fell particularly for privately securitized mortgages suggesting a credit supply expansion. This paper explores two (credit supply) shocks: an increased inflow of global savings into the US, and innovations in the securitization of mortgage credit. Only innovation in securitization matches mortgage market dynamics.

Working Paper: The Portfolio Balance Channel of Quantitative Easing in a DSGE Model with Financial Frictions

Investors who arbitrage between long term government debt and corporate debt expand the Portfolio Balance Channel in that the effects of Quantitative Easing (QE) spill over to the overall cost of corporate borrowing. I find that overall the Federal Reserve’s second round of QE boosts output between 0.5 - 1.7%.

Fewer mortgage bonds change interest rates in 2021

The value of mortgage bonds, which are subject to refinancing over the course of a year, has fallen from approximately kr. 1,047 billion in 2013 to kr. 453 billion in 2021. Fewer borrowers are thus facing changed interest payments on their mortgages in 2021. The decline is primarily driven by the fact that there are fewer bonds behind the short-term adjusta-ble-rate loans (F1 loans).

Female company owners pay higher interest rates

Using microdata, the analysis demonstrates that female company owners pay higher interest rates on corporate loans than their male counterparts. The interest rate differential is both economically and statistically significant, and does not disappear when adjusting for relevant company and loan characteristics using sophisticated statistical methods.

Working Paper: Female business owners pay higher interest rates on corporate loans

Female owners of small and medium-sized enterprises, on average, pay almost 1 percent higher interest rates than male owners. Firm and loan characteristics explain most of this difference. Nonetheless, a 26 basis point gap cannot be explained, suggesting that female business owners tend to leave a disproportionate share of money on the table during negotiations with credit institutions.

Mortgage debt in holiday homes grew during corona

In the past year, Danes have increased their mortgage debt with collateral in holiday homes by kr. 6.9 billion to kr. 90.6 billion. This is an increase of 8.3 per cent, which is primarily driven by an increase in fixed-rate debt. In comparison, mortgage debt with collateral in owner-occupied housing has increased by 3.6 per cent the past year. Mortgage debt with collateral in holiday homes now amounts to 5.2 per cent of homeowners' total mortgage debt of kr. 1,757 billion.

New head of the Financial Stability department

​Danmarks Nationalbank has appointed Peter E. Storgaard the new head of the Financial Stability department.

Outlook for the Danish economy - Danish economy is heading for a mild boom

The reopening of the Danish society is in full swing characterised by high private demand. Growth is expected to continue, and there are already large price increases in the housing market as well as signs of bottlenecks building up. The Government should prepare tightening fiscal policy more than planned, and there is a need for measures to strengthen robustness in the housing market.

Central bank cooperation and instant payments

Central banks continue cooperation to improve instant cross-border payments across multiple currencies.

Strong growth ahead for the Danish economy in the coming years

​The reopening of the Danish economy is in full swing. Overall activity has all more or less recovered to pre-pandemic levels, and the Danish economy is supported by a strong expansion in private demand. This is the conclusion drawn by Danmarks Nationalbank in a projection for the Danish economy, in which the gross domestic product (GDP) is forecast to increase by 3.3 per cent. In 2022 and 2023, GDP is expected to grow by 3.7 per cent and 2.2 per cent.

Central government borrowing strategy in the 2nd half of 2021

The target for sales of domestic government bonds in 2021 is lowered to kr. 110 billion from kr. 125 billion. The on-the-run issues remain unchanged and focus will continue to be on issuance in the 2-year and 10-year nominal bonds. Issuance of short-term papers is increased and the total outstanding amount of T-bills and commercial papers is expected to be kr. 95 billion by the end of 2021, of which up to kr. 60 billion in T-bills.

Bank for International Settlements (BIS) and Nordic central banks launch Innovation Hub Nordic Centre

Governor Signe Krogstrup's presentation for Finansforeningen on Fixed-exchange rates regimes and Quantitative Easing

Governor Signe Krogstrup held a presentation for Finansforeningen (CFA Society Denmark) on 11 June 2021 on the subject: ‘Monetary policy is not easy: Fixed-exchange rate regimes and Quantitative Easing’. The presentation provides the background for central banks use of unconventional monetary policy tools, including negative policy rates and quantitative easing. Following, it is discussed how the Danish fixed-exchange rate regimes is affected by the widespread use of unconventional monetary policy by central banks. Finally, possible side effects of unconventional monetary policy are examined. (The presentation is in Danish only).

Flood risk can potentially affect a large share of credit institutions' exposure

Danish credit institutions have substantial exposures collateralised by real estate at risk of flooding in future climate scenarios. These exposures could amount to kr. 200 billion by the end of this century. Some credit institutions have a large share of the exposures at risk concentrated in the same geographical area.

The pension sector adds to equity investments

The insurance and pension sector is increasingly buying equities. The sector's equity holdings rose from constituting 35 per cent of its total investments in January 2018 to 42 per cent in March 2021. In the same period, the share of bonds was reduced from 56 to 51 per cent, while foreign investment fund certificates etc. decreased from 9 to 7 per cent.

Foreign Exchange and Liquidity and Monthly Balance Sheet, May 2021

​In May 2021, the foreign-exchange reserve increased by kr. 17.2 billion to kr. 455.9 billion.

Record-breaking firm dividends despite corona

Notwithstanding the banks, Danish listed firms paid out almost kr. 38 billion worth of dividends to their shareholders during the first four months of 2021. That is a new record. Banks' dividends were still limited compared to the years before 2020.

Decline in foreign ownership of mortgage bonds

For a number of years, foreign investors have bought large amounts of Danish mortgage bonds and today they own more than a quarter of the entire Danish mortgage bond market. However, since last term month, foreign investors have sold both fixed and variable rate mortgage bonds (incl. adjustable rate mortgage bonds, ARM) for a total of kr. 19 billion. A significant part of the amount is due to the maturities of ARM bonds.

Danmarks Nationalbank's comments on The Economic Council's discussion paper, Spring 2021

Danmarks Nationalbank's comments on The Economic Council's discussion paper, Spring 2021.

Interest-only mortgage debt at kr. 800 billion

In the first four months of 2021, kr. 30.3 billion was added to the Danish homeowners' total mortgage debt. Interest-only debt accounts for two thirds of the increase. Out of homeowners' total mortgage debt of kr. 1,757 billion, kr. 800 billion is now interest-only debt.

Financial stability - Build-up of risks in credit institutions

The banks are ready for the ongoing economic recovery: Their lending to hard-hit corporations is limited, and provisions have been made to handle losses. But the booming housing market gives cause for concern. Higher down payment requirement and amortisation requirement for highly indebted homeowners are among the measures that should be considered in order to limit vulnerability in connection with a subsequent drop in house prices.

Build-up of risks in credit institutions

​There are signs of increased risks in the institutions' housing lending. Danish homeowners' gross debt relative to their income is among the highest in the world, and lending to homeowners is still increasing. The credit institutions have also granted more home buyers deferred amortisation. In 2020, loans with deferred amortisation constituted just under half of all new lending to highly indebted homeowners.

A few systemic banks have capital shortfall in severe recession

A stress test of the banking sector shows that a few systemic banks fall short of their risk-based capital requirements in a severe recession scenario. Most banks are generally better capitalised than previously, but they are challenged in the stress test by weaker earnings, which means they are less resilient under stress. The stress test also shows that the banks must continuously ensure sufficient surplus relative to the MREL.

Working Paper: Stock market evidence on the international transmission channels of US monetary policy surprises

The Working Paper evaluates the economic sources of the stock market responses of 40 countries to surprises in US monetary policy. We show that fed funds rate and large-scale asset purchases surprises affect foreign stock markets because they influence foreign countries’ real economic outlook. Forward guidance surprises seem to convey non-monetary information.

Governor Lars Rohde's presentation at Djøf's Negotiator conference on status and prospects for the Danish economy

The pandemic has resulted in a two-speed economy: For example, activity has been low in the experience industry due to fears of infection and restrictions, while it has been high in, for example, the construction industry and in the housing market, where prices have increased significantly. The two-speed situation is also evident in the labour market, where employment has especially been affected in the service industries. Looking ahead, Danmarks Nationalbank expects that economic activity will quickly recover in line with the population being vaccinated and the restrictions being eased. (The presentation is in Danish only.)

Governor Per Callesen's speech at the Europa Think Tank's webinar on digital euro

Governor Per Callesen's speech on 23 April 2021 at the Europa Think Tank's webinar on the digital euro.

Banks ready for expiry of government liquidity support

The banks are well equipped to make loans to viable corporations when the deferred tax payment deadlines and tax loans fall due. At the same time, the corporations' use of the relief packages have dropped to a low level. On this basis, it is assessed that the banks will be able to handle any deterioration in the creditworthiness of their customers on expiry of the relief packages.

Testing with ethical hackers continues in the financial sector

​​Danmarks Nationalbank and the individual participants in the TIBER-DK programme have decided to continue testing with ethical hackers in future. The decision is based on the good experiences with the tests, the purpose of which has been to strengthen cyber resilience and thus promote financial stability.

Passive and active global equity sub-funds yield almost the same returns

Since January 2020, active investment funds, investing in global equities, yielded an average return of 16 per cent, while passive funds yielded around 15 per cent.

Foreign Exchange and Liquidity and Monthly Balance Sheet, April 2021

​In April 2021, the foreign-exchange reserve decreased by kr. 7.9 billion to kr. 438.7 billion.

Oversight of the financial infrastructure 2020

The report presents the conclusions of Danmarks Nationalbank's oversight of the Danish payments infrastructure in 2020. The core payment and settlement systems and most important payment solutions extensively comply with international safety and efficiency standards. Efforts are continuously made to enhance the cyber resilience of systems/solutions. Due to the evolving nature of the cyber threat landscape, there is room for improvement – despite ongoing progress.

Record-breaking dividends sent abroad

Foreign investors are fond of Danish shares, and Danish listed companies paid dividends in March like never before. This meant record-breaking dividends for the foreign shareholders who owned Danish shares amounting to kr. 2,081 billion in March.

New shares for kr. 42 billion in first quarter of 2021

In the first quarter of 2021, the net issuance of listed Danish shares amounted to kr. 42 billion, driven mainly by Tryg's issuance of new shares. Price changes on existing shares amounted to kr. 39 billion in the same period. Thus, the total value of the Danish stock market rose to kr. 3,815 billion at the end of March 2021.

Corporate deposits fell sharply in March 2021

Since the start of the lockdown in March 2020, Danish companies have significantly increased their deposits in banks, but in March 2021, deposits fell by kr. 44 billion. This corresponds to a reduction of almost 10 per cent of the companies' total deposits, from kr. 445 billion in February 2021 to kr. 401 billion in March 2021.

Continued low rates on corporate bank debt

Over an extended period, interest rates on corporate bank debt have been declining. In March 2021, the average interest rate was 2.37 per cent, while it was above 4 per cent just seven years ago. However, the average interest rate on corporate debt in-creased marginally in March 2021.

Danes tap and pay

In the late summer of 2015, Dankort, the national debit card, was issued with a contactless function for the first time. Now 5.5 years later approximately 98 per cent of Dankort and VisaDankort cards allow contactless payments.

Low interest rates reflect fixed exchange rate policy and international conditions

The response of private customers to negative deposit rates

Negative deposit rates for household customers are now used by most banks in Denmark. Furthermore, the thresholds for when negative interest rates are payable have gradually been reduced. There are indications that household customers reduce their deposits when their bank announces negative interest rates. They also appear to react to the prospects of negative deposit rates by increasing their demand for investment fund shares and switching their deposits to pool schemes.

Working Paper: Nowcasting and forecasting economic activity in Denmark using payment system data

We show that payment system data can be used to improve forecasts of short-term changes in economic activity in Denmark. We compare the predictive performance of payment system data to a set of high‑frequency variables that includes industrial production and consumer prices, among many others.

Governor Signe Krogstrup's presentation at ESM seminar about climate change and debt sustainability

Governor Signe Krogstrup's presentation "Climate change and debt sustainability" at ESM seminar, 21 April 2021. The presentation addresses how climate change and the transition to a low-carbon economy can affect countries' debt levels and fiscal sustainability. A point made is that increased uncertainty about the future could result in budget deficits and higher interest rates.

Working Paper: Consumer good search: theory and evidence

When households search more for low prices on consumer goods, they lower firms' markups. The extent to which household search affects these markups fluctuates with the business cycle, which has been used in various macroeconomic models to generate pro-cyclical fluctuations in the markups. This Working Paper shows that it is difficult to align the basic underlying search model with the empirical differences in search between employed and unemployed individuals, and cautions against using these models in the context of business cycles.

Opening of 0.00 per cent bullet loan 2024

Working Paper: Monetary Policy Expectation Errors

We use survey expectations about future monetary policy to decompose excess returns on fed funds futures and overnight index swaps into a term premium and an expectation error component. We find that excess returns are primarily driven by expectation errors, while term premia are economically small and negative on average. Most expectation errors stem from market participants underestimating how aggressively the Federal Reserve has eased policy during the last three decades. Our findings reveal that market participants are continuously learning about the central bank's reaction function and have been slow to recognize the rising importance attributed to deteriorating financial conditions and falling stock prices. We document similar results in an international sample of six major currency areas.

Increased loan demand from private customers

In Danmarks Nationalbank's lending survey 1st quarter of 2021 several banks report that loan demand both from their existing and new private customers increased from the 4th quarter of 2020 to the 1st quarter of 2021. The banks mention, among other things, increased activity on the housing market as a possible explanation for the increased loan demand.

Refinancing has boosted the interest rate pass-through to fixed-rate mortgages

Half of homeowners in Denmark finance their mortgages via fixed rate loans. Danish fixed rate mortgages are special, as they can be re-financed without the outstanding debt being significantly increased. This makes refinancing attractive when interest rates decrease. Declin-ing interest rates since the financial crisis have implied that many homeowners have refinanced their fixed rate mortgages to lower rates. This has increased the interest rate pass-through and thus supported the transmission of monetary policy rates to homeowners' budgets.

Working Paper: The role of refinancing in the interest rate pass-through to fixed-rate mortgage contracts

In this paper, I study how mortgage refinancing influences the interest rate pass-through to household budgets via fixed-rate mortgage contracts in Denmark. The paper shows that the long-run interest rate pass-through is significantly below unity in the years after the financial crisis and subsequently converges towards a level close to unity. The result can be used to understand the importance of the asymmetric effects of monetary policy transmission.

Assistant Governor Karsten Biltoft new CEO of Finansiel Stabilitet

​Assistant Governor Karsten Biltoft will be leaving Danmarks Nationalbank to take up the position of CEO of the resolution authority Finansiel Stabilitet on 1 December 2021.

How do non-pharmaceutical interventions affect the spread of COVID-19? A literature review

This memo reviews the academic literature on the effectiveness of non-pharmaceutical interventions in mitigating the spread of COVID-19. Only empirical studies are included. Interventions generally reduce COVID-19 spread but the literature is less conclusive for some interventions than others. Intervention timing and local characteristics are determinants of effectiveness.

Foreign Exchange and Liquidity and Monthly Balance Sheet, March 2021

In March 2021, the foreign-exchange reserve increased by kr. 17.1 billion to kr. 446.5 billion. The increase reflects Danmarks Nationalbank's net purchase of foreign exchange for kr. 17.1 billion. In March, Danmarks Nationalbank's net purchase of foreign exchange due to intervention in the foreign-exchange market amounted to kr. 17.0 billion.

Working Paper: Overpersistence Bias in Individual Income Expectations and its Aggregate Implications

Using micro-level data, we document a systematic income-related component in household income forecasting errors. We show that this bias can be formalized by a modest deviation from rational expectations, where agents overestimate the persistence of their income process. The bias alters the distribution of marginal propensities to consume which makes government stimulus policies less effective.

IIP remained robust despite decline in 2020

Denmark's international investment position (IIP) fell by kr. 367 billion last year and amounted to kr. 1,428 billion at the end of 2020. The decline is mainly due to a strong Danish stock market and a weaker dollar exchange rate. This is only the second fall in Danish annual IIP since Denmark went from negative to positive IIP in 2009.

Rising share prices lift Danes' wealth

Danish households' net financial wealth – the difference between financial assets and debt – increased by kr. 811 billion in 2020. This corresponds to an increase of kr. 294,000 for the average Danish household, which thus had financial wealth of approx. kr. 2.3 million at the end of last year.

Huge increase in Danes' foreign share purchases

Danish household purchases of foreign shares via banks and trading platforms have hit record highs since the coronavirus outbreak in 2020. Net purchases since the end of March last year total kr. 16 billion, resulting in total holdings of foreign shares of kr. 108 billion. Households also own foreign shares through investment funds and through their pension savings. In comparison, they sold Danish shares for kr. 0.5 billion in the same period.

Mortgage bonds have become longer

A rise in the long-term interest rates in February 2021 contributed to an increase in the duration of fixed-rated callable mortgage bonds from 4.8 to 6.3 years. At the end of February, the total outstanding volume of callable mortgage bonds was kr. 1,356 billion.

Large geographical difference in interest-only

For the first time in several years, there was a significant increase in Danes' mortgage debt without instalments in 2020. However, the propagation of interest-only is very different from municipality to municipality: For example, at the end of the year, the share of the total interest-only mortgage debt was just 18 per cent in Lolland Municipality against as much as 69 per cent in Gentofte Municipality. Mortgage debt without instalments is most widespread in and around large towns and in North Zealand, while the southern and western municipalities, in particular, have a lesser degree of mortgage debt without instalments.

One in four mortgage loans comes with negative rates

At the end of 2020, 26 per cent of Danes' mortgage loans secured on real estate had negative interest rates, equivalent to about 400,000 loans. Even if interest rates are negative, borrowers continue to pay administration fees to the mortgage credit institution. The average fee is 0.81 per cent p.a., corresponding to kr. 8,076 per borrowed million. So, if the fee is included, only few loans have negative interest rates.

A Factor Model Approach to Nowcasting Danish GDP

This memo documents a nowcasting model for Danish GDP used during the economic crisis related to the outbreak of COVID-19. During this crisis, the model provided timely and more accurate nowcasts than a simple model. To improve the timeliness of nowcasts we make use of new high-frequency indicators.

Working Paper: Detecting turning points in the Danish economy in real time

This working paper documents an econometric model for detecting turning points in the Danish economy. The model can be updated immediately as data comes through. It is shown that the model gives correct signals about the activity in the Danish economy in real time.

Outlook for the Danish economy – Prospects of a rapid recovery once restrictions are eased

The second wave of the pandemic and new lockdowns have temporarily interrupted economic recovery and resulted in new large losses of activity in large parts of the Danish and international economies during the winter. However, other parts of the economy are seeing high activity, including construction and the housing market. Vaccination of the population and reopening of society have begun. Large savings, disbursement of holiday pay funds and accumulated demand provide a sound basis for a heavy increase in activity when the economy is less constrained by restrictions. Overall, activity is expected to have recovered towards the end of 2021.

Monetary and financial trends - Accommodative financial conditions support the real economy

Despite long term yields in particular having increased in 2021, the interest rate level is still low. Simultaneously, equity and house prices have increased during the past six month, and the financial conditions are considered accommodative. The Danish krone is moderately strengthened against the euro since March 2020.

Rapid economic recovery is possible, when restrictions are eased

​A gradual reopening of society has commenced, but large parts of the Danish economy remain hampered by restrictions. There is a sound basis for a rapid economic recovery. The vaccination of the population, large savings, the disbursement of holiday allowance and accumulated demand provide fertile ground for a sharp increase in activity when the economy is less restricted by restrictions. Danmarks Nationalbank is projecting gross domestic product (GDP) to increase 1.4 per cent this year, 4.5 per cent in 2022 and 2.2 per cent in 2023.

Annual Report 2020

Danmarks Nationalbank posted a profit of kr. 1,616 million in 2020 against a profit of kr. 6,096 million in 2019. Gold stock, equity exposure and bond holdings all contributed significantly to the profit for the year.

Technical adjustments of the monetary policy instruments

​Danmarks Nationalbank carries out a technical adjustment of the monetary policy instruments. The purpose is to reduce fluctuations in the Danish money market rates resulting from changes in the size and composition of the banks' deposits and lending at Danmarks Nationalbank.

Technical adjustment of the monetary policy instruments

Danmarks Nationalbank introduces one single rate for deposits and one single rate for monetary policy loans. Simultaneously, the difference between the monetary policy rates is narrowed. The adjustments ensure more stable money market rates and thus a more predictable effect on the Danish krone. The adjustments are not intended nor expected to affect the level of money market rates or the Danish krone.

Working Paper: Regulating Liquidity Risk in Mutual Funds

I analyze the effects of liquidity risk regulation in a model of investors, mutual funds, and the underlying asset market. Investor redemptions lead mutual funds to sell assets, which may result in fire sales if market liquidity, driven by the anticipation of fire sales, is scarce. Mutual funds optimally choose to pass fire sales of their assets on to investors. Pecuniary externalities make liquidity supply to the underlying asset market inefficiently low. Regulatory policies, liquidity requirements for mutual funds, and redemption gates have adverse effects on liquidity provision to the asset market and may increase the incidence of fire sales.

Crisis management of credit institutions – what is new?

Today, we have crisis management rules in Denmark and the rest of the EU which ensure crisis management of failing credit institutions without the use of government funds. A recent revision of the rules makes it more likely that senior unsecured creditors will have to contribute to the crisis management of a failing credit institution. It is important that senior unsecured creditors are aware of the risk and take it into account in their risk management.

Spring pension-thriller turned into success

The total return on Danish pension savings ended at kr. 251 billion for 2020 – equivalent to an annual return of approximatively 6.1 per cent. The positive return was not given in the spring, when the corona crisis led to large declines in the financial markets and thus also in the return on Danish pension savings. In March, when it looked the worst, the Danes expected a total loss on their pension savings of kr. 255 billion.

Foreign Exchange and Liquidity and Monthly Balance Sheet, February 2021

​In February 2021, the foreign-exchange reserve increased by kr. 1.8 billion to kr. 429.4 billion.

Continued high foreign interest in mortgage bonds

Since the beginning of 2020, foreign investors' ownership share of Danish 30-year fixed rate callable mortgage bonds has been constant at around 40 per cent. At the end of January 2021, this corresponded to foreign investors owning bonds totalling kr. 408 billion.

30-year fixed-rate mortgage bonds exceed kr. 1,000 billion

In January 2021, the total outstanding volume of 30-year fixed-rate callable mortgage bonds amounted to kr. 1,037 billion, which is an increase of kr. 138 billion compared to last year. There has been a clear shift towards mortgage bonds with lower coupon rates in connection with falling interest rates and refinancing of mortgages. As a result, the share of bonds with a coupon rate of 1 per cent or lower has increased from 49 per cent to 71 per cent since January 2020.

Mortgage debt without instalments grows again

The Danes' appetite for mortgage loans without instalments was renewed in 2020, where the total mortgage debt without instalments grew by kr. 30.9 billion. Mortgage loans without instalments were introduced in 2003 but debt without instalments has in general been declining since 2012. The change in 2020 is thus the first significant increase in many years and the largest increase since 2011.

The Danes' mortgage loan expenses fall

The Danes' annual mortgage loan expenses still fall and have now reached on average kr. 15,532 per borrowed million. Kr. 7,450 of this amount is interest payments to the bond investors, and kr. 8,082 is administration fees to the mortgage credit institution.

Working Paper: The Value of Bond Underwriter Relationships

This paper analyzes the role of underwriters for issuers of corporate bonds. The results suggest that – in terms of issuance costs – bond issuers benefit from using underwriters they have used before, but, at the same time, this exposes the issuer to a credit risk spillover from the underwriter.

Few foreign direct investments in 2020

The activity in foreign direct investments (FDI) was low in 2020. Danish companies' outward FDI increased by kr. 5 billion, while Danish inward FDI decreased by kr. 10 billion.

High savings during corona were driven by restrictions rather than precautionary consumers

Households' savings increased significantly during the first wave of the corona pandemic in Denmark and several other countries. This Economic Memo finds that the higher savings in Denmark were driven by restrictions rather than precautionary consumers. Precautionary savings have so far been relatively limited and smaller than during the financial crisis. (Memo available in Danish only).

Danish Government Borrowing and Debt 2020

The government budget developed better than expected in 2020. The Danish central government debt amounted to kr. 536 billion, equal to 23 per cent of GDP at the end of 2020. The course of the covid-19 crisis has clearly highlighted the importance of the central government having access to a broad and diversified investor base through multiple financing channels. Despite periods with market turmoil, domestic government bonds were sold at record low yields. On average, nominal government bonds were sold at a yield to maturity of -0.33 per cent p.a. and an average maturity of 11.6 years. Interest costs on the central government debt totalled 0.7 per cent of GDP.

Are climate change risks priced in the US stock market?

We construct measures of physical and transition risks by conducting textual analysis of climate news. Using U.S. stock prices, we find that only the short-term risks elicited by the political debate are priced. Longer running risks elicited by news on international summits, global warming and natural disasters are not priced.

Working Paper: Are Climate Change Risks Priced in the US Stock Market?

We construct proxies of physical and transition risks by conducting textual analysis of climate news. Using U.S. stock prices, we find that only the short-term risks elicited by the political debate are priced. Longer running risks elicited by news on international summits, global warming and natural disasters are not priced.

Denmark supports the IMF's crisis response

The International Monetary Fund (IMF) has approved a historically large number of loans during the coronavirus crisis. The demand for IMF loans is expected to increase further as a result of the coronavirus crisis and vulnerabilities in a number of countries. Danmarks Nationalbank contributes to the IMF's crisis response and has made new lending resources available to the IMF on behalf of Denmark.

The IMF's provision of insurance against balance of payments needs and how to improve it

The memo summarizes the design and use of the IMF's precautionary facilities since their introduction and discusses lessons and potential reform options. In particular, the framework for these facilities should be adjusted to address prolonged use at high access levels.

Foreign Exchange and Liquidity and Monthly Balance Sheet, January 2021

​In January 2021, the foreign-exchange reserve decreased by kr. 11.4 billion to kr. 427.6 billion.

Working Paper: How news affects sectoral stock prices through earnings expectations and risk premia

We show that the transmission of news to prices goes through a combination of changing earnings expectations and risk premia. Price changes for especially the financial sector are mainly driven by changes in equity risk premia, while changes in earnings expectations play a comparatively larger role for other sectors.

Increased appetite for investment funds in 2020

Danish private investors purchased UCITS fund shares worth kr. 21 billion in 2020, a significant increase on the previous two years and the largest purchase since 2015. At the end of December 2020, the market value of private investors' UCITS fund shares amounted to kr. 378 billion. By way of comparison, their investment in listed stocks and bonds, primarily stocks, totalled kr. 326 billion.

Card turnover 0.9 per cent lower than last year

In 2020, total Danish payment card turnover ended 0.9 per cent below the 2019 level. So, for the first time since the introduction of payment cards in 1983, Danes used their payment cards less than the previous year. Under normal circumstances, card turnover has historically risen by about 5 per cent annually, driven by general economic growth and a growing trend for card payments instead of cash payments.

Consumption less affected by the latest lockdown

On 17 December 2020, Denmark entered its second lockdown, and restrictions were tightened further on 25 December. As a result, consumption, measured by card turnover, decreased by 10.0 per cent during the first five weeks of the lockdown relative to the year-earlier period. By way of comparison, card turnover dropped by 18.7 per cent during the first five weeks of the spring lockdown, indicating a softer economic slowdown.

Massive purchases of foreign securities in 2020

Danish investors purchased foreign portfolio assets for kr. 248 billion in 2020. This is the largest-ever foreign portfolio investments by Danish investors. The investments were mainly in foreign shares etc.

Unwavering foreign interest in Danish shares

Foreign investors' ownership of listed Danish shares increased from 53 per cent to 55 per cent in 2020, where the value of the Danish stock market increased to kr. 3,733 billion.

Switch operations via the Danish central-govt's auction system in 1st Half of 2021

For the remainder of 1st Half of 2021, switch operations will be offered via the auction system MTS PAF which is currently used for the regular auctions of Danish government securities. First time will be on 11 February 2021.

Negative interest on Danes' deposits of kr. 136 billion

In October 2020, 13.4 per cent of Danes' deposits earned negative interest, equivalent to deposits of about kr. 136 billion, up about kr. 100 billion on the latest survey in February 2020. These figures are from Danmarks Nationalbank's latest survey of the prevalence of negative deposit rates, covering 18 of Denmark's medium-sized and large banks.

Deposit rate averaging -0.07 per cent

In October 2020, the average rate on Danes' ordinary deposits, which can be immediately withdrawn or used for payments, was -0.07 per cent. This means that Danes pay an average of kr. 7 annually to banks for each kr. 10,000 of deposits.

New Head of Banking and Markets in Danmarks Nationalbank

​Danmarks Nationalbank has appointed Lars Mayland Nielsen as Head of Banking and Markets with effect from 1 February 2021.

Danmarks Nationalbank in pilot project against money laundering and VAT fraud

​In a pilot project, Danmarks Nationalbank has examined the potential of more effective monitoring of cash flows across banks in the fight against money laundering and VAT fraud. The project has shown that a correlation of data could have potential gains extending beyond what the individual bank or authority will be able to achieve on its own.

Data-driven effort strengthens the fight against money laundering

Danmarks Nationalbank, in collaboration with a large Danish bank and other institutional actors, has shown that an innovative risk-based approach based on multiple data sources, among which granular transaction data, can support the fight against economic crime. Realising the full potential of such an approach requires combining data across banks and public institutions.

Working Paper: QE in a quasi-preferred habitat: The case of the Danish pension sector and the ECB asset purchase programme

The reaction of Danish pension companies to ECB’s asset purchase programme is analysed using a novel, in-house data set. The pension companies sold euro bonds and bought Danish bonds in the first months following the introduction of the ECB purchase programme in 2015. After a short while, the pension companies returned as buyers of euro bonds.

Pension fund response to ECB purchases

In early 2015, when the European Central Bank (ECB) began purchasing government bonds issued by euro area countries, Danish pension funds sold off the bonds purchased by the ECB to buy Danish bonds. Changes to the ECB's monetary policy stance are important to Danmarks Nationalbank and Danish monetary policy.

Nordic-Baltic countries engage the IMF to conduct an analysis of cross-border money laundering and terrorist financing risks in the region

​The eight countries of the Nordic-Baltic Constituency of the International Monetary Fund (IMF) have taken the initiative to engage the IMF to conduct a regional analysis of money laundering (ML) and terrorist financing (TF) threats and vulnerabilities.

Further weakening in loan demand from NFC

In Danmarks Nationalbank's lending survey for the 4th quarter of 2020, 11 out of 19 banks report that loan demand from existing corporate customers dropped from the 3rd to the 4th quarter of 2020. Nine of 11 banks also reported that demand decreased from the 2nd to the 3rd quarter and have now seen further declines from the 3rd to the 4th quarter. Weighted by the banks' respective market shares, the decline in loan demand from the 3rd to the 4th quarter corresponds to a net figure of -27.6.

Opening of 0.00 per cent bullet loan 2031

Foreign record purchase of Danish bonds

From January to November 2020, foreign investors have increased their portfolio investments in Danish securities by kr. 286 billion. Foreign investors have in particular bought Danish bonds. The purchase of Danish bonds for kr. 252 billion in 2020 is the largest in the period where portfolio investments statistics have been compiled.

Large amount of Danish government securities

In 2020, the total nominal outstanding amount of Danish government securities increased by kr. 227 billion, to a total of kr. 807 billion in November 2020. Of this, kr. 710 billion is issued in the Danish kroner, and kr. 97 billion is issued in foreign currency. The increased amount of outstanding government securities in 2020 partly reflects the government's increased borrowing needs, as a result of the corona crisis, and the build-up of a liquidity reserve.

New Head of Economics and Monetary Policy at Danmarks Nationalbank

​Danmarks Nationalbank has appointed Thomas Harr Assistant Governor and Head of Economics and Monetary Policy. He will be taking up his new position on 1 May 2021.

Bank loans to NFCs have decreased during 2020

In a year affected by covid-19 and restrictions banks' loans to Danish non-financial corporations (NFCs) decreased by kr. 18.5 billion. The bank loans to NFCs were kr. 449.5 billion by the end of November 2020, which is 4.4 per cent less compared to the same pe-riod last year.

Majority of mortgage loans are with installments

The amount of Danes' mortgage loans with install-ments was kr. 955 billion by the end of November 2020. Thus, it has increased by kr. 38 billion in 2020. 55.3 per cent of the mortgage debt was with installments compared to 55.0 per cent at the beginning of 2020.

Foreign Exchange and Liquidity and Monthly Balance Sheet, December 2020

​In December 2020, the foreign-exchange reserve decreased by kr. 16.8 billion to kr. 439.6 billion.

Unchanged IIP for the last two quarters

Denmark's international investment position (IIP) has remained largely unchanged for the last two quarters, totalling kr. 1,481 billion at the end of the 3rd quarter. Overall, the current account surplus has increased the IIP while price and exchange rate changes have reduced the IIP similarly.

Danes' wealth is greater than before the corona

The Danish households' financial net wealth increased by kr. 362 billion in the third quarter and thereby reached kr. 5657 billion in total. The rapid recovery of wealth thus continued and now more than offset the historically large decline at the beginning of the year with a net increase of kr. 168 billion.

Central government borrowing strategy 2021

The target for sales of domestic government bonds is kr. 125 billion. Issuance will be focused in the 2-year and 10-year nominal bonds. On 20 January, a new 10-year bond with maturity in 2031 will be opened. A new 2-year bond with maturity in 2024 will also be opened in the 1st half of the year. The target for sales of domestic T-bills is kr. 60 billion, and the outstanding amount of commercial papers will be reduced in 2021 as the temporary Covid-19 measures are phased out.

Working Paper: Labor cost pass-through to producer prices in Denmark

We estimate the pass-through of a wage shock to producer prices of firms in Denmark. Our results suggest that the pass-through elasticity of wage increases to prices amounts to about one third. Our results are in line with studies of earlier time periods and confirm an important causal relationship between wages and prices.

Faroese economy - The Faroese economic boom is losing momentum

Nine months after the outbreak for the corona pandemic, employment on the Faroe Islands is high, unemployment very low, and parts of the economy experience labour shortages. However, exports have lost speed this year on the back of extraordinary growth, and the economic boom now seems to have peaked. In the future, more elderly and less working-aged challenges the sustainability of public finances. It is important to prioritize reforms early on that bring a balance to income and expenses in the future.

Outlook for the Danish economy - Spread of coronavirus delays recovery

Parts of the Danish economy are dominated by high activity, while other parts are limited by restrictions that delay recovery. Economic growth has slowed down, but is expected to pick up in 2021 as the population is vaccinated and restrictions are eased. Fiscal policy is currently stimulating demand in industries not affected by restrictions and in which activity is already high. Fiscal policy should not be eased further, but temporary relief measures may be extended to industries affected by restrictions.

Financial stability - Banks should keep their powder dry

So far, the credit institutions have come through the crisis relatively unscathed. With a number of relief packages, the central government has provided a cushion under large parts of the Danish corporate sector. However, credit institutions must prepare for the end of the schemes. In line with the government relief packages being phased out, the credit institutions will have to expect higher losses and a deterioration in the credit quality of their lending. The situation remains highly uncertain, and the credit institutions should be cautious when planning dividend payments.

A few banks fall short of capital requirements in stress test

A stress test of the banking sector shows that a few banks fall short of the capital buffer requirements in a severe recession scenario. However, due to the suspension of dividend payments and share buybacks, most banks are more resilient to stress than previously. For the first time, Danmarks Nationalbank uses the credit register data to allocate impairment charges more accurately among banks' corporate customers.

Banks should keep their powder dry

Increased infection rates delay recovery

​Danmarks Nationalbank has updated its forecasts for the Danish economy and now expects GDP to fall by a total of 3.9 per cent in 2020, followed by a subsequent increase of 2.9 per cent and 3.3 per cent in 2021 and 2022, respectively. (Correction to numbers released earlier today).

Danish kroner on new settlement platform

Considerable variation in Danes' pension savings

At the beginning of 2020, each Dane had average pension savings of kr. 589 thousand, but considerable variation in savings is seen across the Danish population. About two-thirds of Danes have below-average pension savings, while the remaining third have savings above average.

How does COVID-19 affect r*?

This memo discusses effects of COVID-19 on interest rates through the lens of global movements in the natural real interest rate. While government spending and public debt issuance are likely to cause a rise in r*, r* may decline due to precautionary behaviour. The net effect is uncertain.

Stable pension contributions despite corona

During the first three quarters of 2020, the pension sector received pension contributions totalling kr. 99 billion, equivalent to an increase of kr. 1 billion, or 1 per cent, on the prior-year period. Pension contributions generally rose by an average of 2.5 per cent per year during the period from 2015 to 2019.

Foreign Exchange and Liquidity and Monthly Balance Sheet, November 2020

​In November 2020, the foreign-exchange reserve decreased by kr. 5.0 billion to kr. 456.4 billion.