Danish and international economy hit by pandemic

Economic activity has slowed sharply as a result of the outbreak of coronavirus, the measures to contain the infection and the resulting behavioural changes. A favourable starting point for the Danish economy improves its ability to deal with the economic consequences of the crisis. Danmarks Nationalbank supports the relief packages, which will temporarily help sustain employment and businesses, but more traditional fiscal stimulus may be needed going forward. Public debt will grow as a result of the downturn and relief packages, but there is room for that. For 2020 as a whole, real GDP growth is estimated to be between -3 and -10 per cent. (This publication is a translation of the analysis published 1 April 2020 in Danish only).

Foreign Exchange and Liquidity and Monthly Balance Sheet, March 2020

​In March 2020, the foreign-exchange reserve decreased by kr. 56.9 billion to kr. 372.1 billion.

The coronavirus causes large but temporary downturn in Danish economy

​The boom in the Danish economy has come to an abrupt end in early 2020. The outbreak of the coronavirus and the measures implemented to contain its spread have led to a sharp contraction in economic activity. In an analysis, Danmarks Nationalbank has listed three scenarios, illustrating how severely the Danish economic activity may be affected. These scenarios are subject to exceptionally high uncertainty.

Statistics News, 4th quarter 2019 - Net IIP of 78 per cent of the gross domestic product

Denmark's international investment position (IIP) was kr. 1,814 billion or 78 per cent of GDP at the end of 2019. IIP increased kr. 367 billon last year, primarily driven by a record-high current account surplus of kr. 184 billion. Just 10 years ago, Denmark han an IIP of zero. This release addresses the latest figures in the statistics for 'Denmark's international investment position' which is from the end of 4th quarter 2019. Since then, extraordinary big changes in the economy have occurred due to covid-19. At the end of June, Danmarks Nationalbank will update this statistic with the figures for the 1st quarter of 2020.

Statistics News, 4th quarter 2019 - Households' financial net wealth grew in 2019

The net financial wealth of Danish households increased by 721 billion Danish kroner in 2019. The total net financial wealth was kr. 4,312 billion by the end of 2019, which corresponds to kr. 1.58 million per household. The net financial wealth of households has increased significantly since the financial crisis in 2009, and the households have built up a financial buffer against downturns. There exists a significant degree of diversification between the sizes of the net financial wealth amongst the Danish households. This diversification implies that the effect of the price movements on the financial markets differs between households. This release addresses the latest figures in the statistics for 'Financial accounts' which are from the end of 4th quarter 2019. Since then, extraordinary big changes in the economy have occurred due to covid-19. At the end of June, Danmarks Nationalbank will update this statistic with the figures for the 1st quarter of 2020.

Statistics News, February 2020 - Foreign investors own more than half of the Danish stock market

At the end of February, the Danish listed stock market amounted to kr. 2,840 billion. This release addresses the latest figures in the statistics for 'Securities' which are from the end of February 2020. Since then, extraordinary big changes in the economy have occurred due to covid-19. At the end of April, Danmarks Nationalbank will update this statistic with the figures for March.

Statistics News, February 2020 - Foreign portfolio investments for kr. 3,197 billion

Danish investors increased their foreign portfolio investments by kr. 23 billion in February. With this, Danish investors' total foreign portfolio amounted to kr. 3,197 billion at the end of the month. This release addresses the latest figures in the statistics for 'Portfolio investments' which are from the end of February 2020. Since then, extraordinary changes in the economy have occurred due to covid-19. At the end of April, Danmarks Nationalbank will update this statistic with the figures for March.

Statistics News, February 2020 - Corporations' deposit rates were record low

Deposit rates vis-à-vis non-financial corporations and personally owned companies have fallen by 0.21 and 0.27 percentage points, respectively, over the past 12 months. The decline has been particularly marked since September 2019. At the end of February, average deposit rates reached -0.38 and -0.14 per cent respectively. This release addresses the latest figures in the statistics for loans which are from February 2020. Since then, extraordinarily large changes in the economy have occurred due to covid-19. At the end of April, Danmarks Nationalbank will update this statistics with the figures for March.

Statistics News, February 2020 - Danish NFCs had kr. 426 billion in the bank

At the end of February, Danish non-financial corporations (NFCs), which here cover both public and private non-financial corporations in addition to sole proprietors and unincorporated partnerships, had deposits for kr. 426 billion in Danish banks. The NFCs' deposits have increased by approximately kr. 150 billion since 2012 which corresponds to an increase of just above 50 per cent. This release addresses the latest figures in the statistics for 'Banking and mortgage lending, balances' which are from the end of February 2020. Since then, extraordinary large changes in the economy have occurred due to covid-19. At the end of April, Danmarks Nationalbank will update this statistics with the figures for March.

Danmarks Nationalbank announces auction of US dollar liquidity

Danmarks Nationalbank and ECB reactivate swap line to provide euro liquidity

Annual Report 2019

Danmarks Nationalbank's accounts for 2019 show a profit of kr. 6,096 million, compared with a loss of kr. 24 million in 2018. Both the gold stock, equity exposure and bond holdings contributed significantly to the result for the year. This report is based on information available up to 7 March 2020.

Interest rate increase and expansion of lending facility

​Effective from 20 March 2020, Danmarks Nationalbank's interest rate on certificates of deposit is increased by 0.15 percentage point. The monetary policy spread to the euro area is thereby narrowed from -0.25 to -0.10 percentage points, remaining lower than the rate in the euro area. In the context of Denmark's fixed exchange rate policy, the interest rate increase follows Danmarks Nationalbank's sale of foreign exchange in the market.

Danmarks Nationalbank has established a bilateral swap agreement in dollars with the Federal Reserve

Update to the central government borrowing strategy 2020

In light of the recent initiatives taken by the Danish Government to mitigate the consequences of COVID-19, the domestic government bond issuance target for 2020 is increased from kr. 75 to 125 billion. Furthermore, the opening of the new 30-year nominal bond is brought forward to 1 April and the T-bill programme is expanded.

Mint of Finland to continue producing Danish coins from 2021

Danmarks Nationalbank's interest rates unchanged and launch of extraordinary lending facility

Euro area remains the little brother in transatlantic relations

The euro area economy and its financial sector remains disproportionately more vulnerable to shocks originating from the US than in reverse, as demonstrated in a brand-new international study with data spanning four decades. In an original empirical study, Eddie Gerba from Danmarks Nationalbank and Danilo Leiva-Leon from Banco de España have analysed and compared the interaction between the financial sector and the macroeconomy in the US and the euro area over the past four decades.

Working Paper: Macro-financial interactions in a changing world

We measure the time-varying strength of macro-financial linkages within and across the US and euro area economies. The main results show that the euro area is disproportionately more sensitive to shocks in the US macroeconomy and financial sector. Moreover, while macro-financial interactions have steadily increased in the euro area since the late 1980s, they have oscillated in the US, exhibiting very long cycles of macro-financial interdependence.

Opening of 0.25 per cent bullet loan 2052

Working paper: The impact of inflation targeting: Testing the good luck hypothesis

Was the fall in the level and volatility of inflation over the last 30 years the result of good luck, or good monetary policy? We assess the inflation experience of Canada, an early adopter of an inflation targeting policy. Good luck explains only a minor portion of the changes in inflation after the shift in policy. Most of inflation and output stabilization is explained by the impact on expectations.

Insurance companies and pension funds continue to invest in unlisted assets

Over recent years, low bond yields and low expected returns on other assets have prompted insurance companies and pension funds (I&P companies) to continue investing more pension savers’ funds in unlisted assets such as wind farms, infrastructure, forestry, unlisted enterprises, private equity funds, properties and alternative types of debt. For the first time, newly developed statistics from Danmarks Nationalbank provide a comprehensive overview of this important development.

High returns on listed shares in 2019

2019 has yielded strong returns for the insurance and pension sector. This is especially true for investments in listed equities, which have yielded a return of 30 per cent. Half of the holdings in foreign equities are located in the United States, and the return therefore follows developments in the US stock market, summarized in e.g. the S&P 500 index.

Foreign Exchange and Liquidity and Monthly Balance Sheet, February 2020

​In February 2020, the foreign-exchange reserve increased by kr. 2.7 billion to kr. 429.0 billion.

Most deposits happened via ATM

In the 4th quarter of 2019, Danish private and corporate customers deposited cash into the bank account 1.8 million times for a total amount of kr. 14.8 billion. In 59 per cent of the cases, the deposit was made via an ATM, while 22 and 19 per cent were made via over-the-counter, OTC, and night safe, respectively. In a few years, deposits via ATMs have become the most widespread method, when the money goes into the account.

Lower coupon rate on mortgage bonds

The mortgage banks have increased the amount of 30-year fixed-rate convertible mortgage bonds with a coupon rate of 1.5 per cent or lower by kr. 522 billion in the past year. At the same time, the outstanding amount of bonds with a coupon rate greater than 1.5 per cent decreased. Since February 2019, the net addition of 30-year fixed-rate mortgage bonds totalled kr. 132 billion.

Foreign ownership share in mortgage credit bonds has risen

Foreign investors' appetite for 30-year fixed-rate mortgage bonds is undiminished. Over the past year, foreign investors' purchases of these bonds totaled kr. 58 billion, and the foreign ownership share reached 39 per cent of a total outstanding of kr. 899 billion in January.

Equity risk premium has increased while interest rates have fallen

Before the financial crisis, investors typically expected an annual return on equities of around 7 per cent, while the return on 10-year treasury bonds was around 4 per cent. Today, the return on 10-year treasury bonds is close to zero, while investors still expect a return of around 7 per cent when investing in equities. The risk premium for investing in the equity market rather than safe assets such as government bonds has thus doubled since the start of the financial crisis more than 10 years ago.

Do equity prices reflect the ultra-low interest rate environment?

Economic Memo is a new publication series from Danmarks Nationalbank. Please, update your News service settings if you want to receive a notification when the next Economic Memo is available. The first Economic Memo shows that the equity risk premium has doubled after the financial crisis. As a result, financing costs of corporations declined less than monetary policy rates. The memo looks into explanations behind the higher premium.

Record low interest rate of 0.84 per cent

Almost two-thirds of Danes' mortgage loans got new interest rates in 2019. The many loans with new interest rates resulted in a decrease in the average interest rate (excluding administration fee) on Danes' mortgage loans during the year from 1.20 per cent to record low 0.84 per cent. The lower interest rate corresponds to an average annual saving before tax of kr. 3,600 per million borrowed.

Reduced interest rate sensitivity for agriculture

The agricultural industry's bank and mortgage debt with a variable interest rate has been reduced by kr. 36 billion, corresponding to 13 per cent, the last five years. At the end of January 2020, it was down to kr. 250 billion. The decrease is due to, among other things, increasing instalments. Variable rate loans now amount to 83 per cent of the industry's total bank and mortgage debt of kr. 301 billion.

Cash payments are declining

Danmarks Nationalbank has conducted a survey of the Danish households' use of cash. According to the survey, more and more Danes opt out of using cash as a means of payment, and there is considerable evidence that this trend will continue in the future. However, an entirely cashless society is not envisaged in the foreseeable future.

Largest investments abroad for over 10 years

Danish companies made direct investments abroad for kr. 68 billion in 2019 after a reduction in investments the year before. These are the largest investments since 2008.

Foreign Exchange and Liquidity and Monthly Balance Sheet, January 2020

​In January 2020, the foreign-exchange reserve decreased by kr. 14.9 billion to kr. 426.3 billion.

Expiring interest-only mortgages have implications for household expenditure

Interest-only mortgages are very popular in Denmark, currently making up 45 per cent of outstanding mortgage volumes. These loans allow homeowners to postpone repayment on the mortgage principal - typically for up to 10 years after origination - reducing monthly instalments for a period of time. A small share of borrowers need to cut spending in order to fund the rise in mortgage instalments when the 10 year amortization-free period ends. This analysis show that the reduction in expenditure is substantial for the affected homeowners but the overall effect on the Danish economy is very limited.

Danish government borrowing and debt 2019

Denmark's central government debt amounted to 18 per cent of GDP at the end of 2019. The debt has decreased considerably since 2012, when it peaked after the financial crisis. The central government's financing requirement was met at record-low yields in 2019. The central government issued nominal bonds at an average yield to maturity of -0.33 per cent p.a. and an average maturity of 8 years. Interest costs on the central government debt totalled 0.6 per cent of GDP. In 2019, the central government purchased all the bonds issued for financing social housing. Since early 2018, the central government has purchased bonds for almost kr. 95 billion at market value.

The total UCITS market value is kr. 1.081 billion

The market value of Danish UCITS investment funds reached kr. 1.081 billion at the end of 2019.

Danish investors preferred foreign bonds in 2019

Danish investors have purchased foreign bonds net kr. 123 billion in 2019. Furthermore investors have bought foreign shares and investment funds shares for approx. kr. 17 billion 2019 in total.

High return in 2019

The return on Danish listed stocks was 29.1 per cent in 2019. This is the highest return since 2015. On the Danish bond market the return was 2.2 per cent, which is the highest since 2016. The increases in the return are due to price increases. The Danish stock and bond market had a market value of kr. 2.938 billion and kr. 4.216 billion, respectively, by the end of 2019.

Decreased repayment rates in 2019

The repayment rates for Danish non-financial corporations (NFC's) and households decreased 0.21 and 0.13 percentage points respectively compared to 2018. This translates to an annual saving of kr. 2,104 and kr. 1,282 respectively per borrowed million.

Modest credit growth in 2019

Lending from banks and mortgage credit institutions (MCI's) to non-financial corporations (NFC's) and households grew 2.9 percent in 2019. This is a slight increase compared to 2018, but significantly lower compared to the peak in the 2000s where the total credit growth reached 16.9 per cent. Loans to these two sectors totalled kr. 3,749 billion in December 2019.

Working paper: Modeling frailty correlated defaults with multivariate latent factors

It is typically assumed within corporate default modeling that the covariates have a linear effect on the log-hazard scale, no interactions, and that there is only a single additive latent factor on the log-hazard scale. Using a sample of US corporate firms, we show in this paper that these standard assumptions are too strict and that they matter in practice. We propose instead a frailty-model that relaxes these assumptions and takes into account time-varying covariates, while being able to provide forecasts for arbitrary portfolios.

Stricter lending requirements have made homeowners more robust

Danish authorities have implemented a number of regulations targeting mortgage financing. The new regulations provide incentives for the most indebted homeowners to increase amortization on their mortgages thereby increasing the robustness of the housing market. As the new rules have been implemented, mortgage credit institutions have managed to increase their issuance of new mortgages to first time buyers as well as older existing home owners remortgaging.

Slightly tighter credit standards

In Danmarks Nationalbank's lending survey for the 4th quarter 2019, 4 of the 17 credit managers in the surveyed banks report that they have tightened the credit standards slightly compared to last quarter. When the credit managers' answers are weighted with the market share of their respective bank, the credit standards for lending to corporate and private customers on average are tightened by approximately -6 and -3, respectively (where 0 corresponds to unchanged credit standards and -50 corresponds to all the banks having tightened slightly).

Homeowners reduce consumption when the non-amortisation period ends

Homeowners’ with interest-only mortgages reduce consumption by an average of 3 per cent of income when amortisation starts if they are unable to roll over their interest-only loans into new ones as they might have expected to do. This corresponds to a reduction in expenditure of kr. 14,000 per homeowner per year. This appears from a Working Paper prepared by Henrik Yde Andersen, Senior Economist, Alessia De Stefani, Research Economist and Stine Ludvig Bech, Senior Economist.

Working paper: Mortgage choice and expenditure over the lifecycle: evidence from expiring interest-only loans

We study how homeowners’ consumption responds to the beginning of the amortization period on interest-only mortgages. In response to an average increase in mortgage instalments worth 9 per cent of annual income, consumption drops by 3 percent of income, in the year when amortization starts. This expenditure cut is persistent, but only affects a small subset of borrowers with high leverage ratios. These borrowers might have been unable to rollover their interest-only loans into new ones.

Working paper: Banking panic risk and macroeconomic uncertainty

We show that systemic risk in the banking sector breeds macroeconomic uncertainty. We develop a model of a production economy with a banking sector where financial constraints of banks can lead to disastrous banking panics. We find that a higher probability of a banking panic increases uncertainty in the aggregate economy. We explore the implications of this banking panic-driven uncertainty for business cycles, asset prices and macroprudential regulation. Banking panic-driven uncertainty amplifies business cycle volatility and increases risk premia on asset prices. A countercyclical capital buffer lowers both the probability of banking panics and aggregate uncertainty.

Price increases add to foreign owner ship of C25 stocks

2019 was a good year to own C25-stocks. The foreign owner share of C25-stocks increased to 57 per cent in November, corresponding to kr. 1,426 billion. The increase is due to the fact that foreign investors own the stocks that have had the largest price increases – especially the Novo stock where foreign investors own 73 per cent. Foreign ownership share of C25 stocks has thus increased again after a few years of decline. Foreign investors' stocks have had a total value increase of kr. 282 billion. By comparison, Danes' C25 stocks have risen by kr. 167 billion.

The Danish pension sector buys European bonds

The Danish pension sector has bought foreign bonds for kr. 129 billion since January 2018. The acquisition of foreign bonds consists mainly of bonds from the Euro area, especially Irish, French, and Italian government bonds. Additionally, the pension sector has purchased Swedish state and Hypotek bonds. Conversely, the pension sector has sold American and German government bonds.

The Danes' deposit rate approaches 0 per cent

The interest rate on Danish customers' ordinary deposits, which can be immediately withdrawn or used for payments, has been reduced further in the past year. The rate is approaching 0 per cent on average, when you disregard loan-related deposits.

Fixed-rate lending growth throughout the country

In the recent year, the Danes' mortgage loans have increased by 3.8 per cent. The relatively moderate growth in lending covers a large increase of 14.0 per cent in fixed-rate loans and a reduction of 3.7 per cent in variable-rate loans. Fixed-rate loans now take up 46.7 per cent of the total loans of kr. 1,667 billion.

Foreign Exchange and Liquidity and Monthly Balance Sheet, December 2019

​In December 2019, the foreign-exchange reserve decreased by kr. 5.3 billion to kr. 435.4 billion.

Denmark's international investment position is growing

Denmark's international investment position increased by kr. 144 billion in the third quarter of 2019. This is the ninth consecutive quarter with an increase. The increase is mainly due to the large current account surplus and increases in value of the Danes' foreign assets.

The Danes' net wealth 6th largest in the EU

Danish households' net financial wealth – the difference between their financial assets (e.g. pension and deposits) and liabilities (debt) – was kr. 4,101 billion at the end of the second quarter of 2019. The net wealth corresponds to 177 per cent of the Danish gross domestic product, GDP. This ranks Danish households sixth only surpassed by households in the UK, the Netherlands, Belgium, Sweden and Italy.

Low prevalence of zombie firms in Denmark

Weak firms, "zombies", account for less than 1.5 per cent of Danish firms, which is low compared with other countries. Interest rates have been falling for several years, but the risk of remaining a zombie has not increased. This indicates that lower interest rates have not resulted in a higher prevalence of zombies. Moreover, there are no indications that banks have eased conditions more for zombies than for other firms.

Central government borrowing strategy 2020

The target for issuance of domestic government bonds and T-bills in 2020 is kr. 75 and kr. 30 billion, respectively. This is unchanged from 2019. Issuance will be focused in the 2- and 10-year maturity segments. A new 30-year nominal bond maturing in 2052 will be opened in the 1st half of the year.

Globalisation affects measures of wage competitiveness

Danish firms increasingly have goods processed abroad and sell them directly from abroad. This allows for a higher degree of specialisation, as well as capacity expansion. However, when firms outsource production, Danish value added is to some extent decoupled from use of Danish labour. This is a challenge when measuring wage competitiveness, so in this analysis adjustment is made for Danish firms' activities abroad. That provides a more accurate impression of the competitiveness of physical production in Denmark.

Working paper: What is real and what is not in the global FDI network?

Macro statistics on foreign direct investment (FDI) are blurred by offshore centers with enormous inward and outward investment positions. This paper uses several new data sources to estimate the global FDI network while disentangling real investment and phantom investment and allocating real investment to ultimate investor economies. We find that phantom investment into corporate shells with no substance and no real links to the local economy may account for almost 40 percent of global FDI.

New quarterly insurance and pension sector statistics

The Danish insurance and pension sector (I&P) manage a significant share of the Danish wealth. I&P-corporations assets exceeds 200 per cent of the Danish GDP at the end of 3rd quarter of 2019, and the balance sheets are among the biggest in the world relative to the size of the Danish economy. These figures are available in Danmarks Nationalbank's newly published quarterly statistics on insurance and pension.

Foreign Exchange and Liquidity and Monthly Balance Sheet, November 2019

​In November 2019, the foreign-exchange reserve decreased by kr. 1.9 billion to kr. 440.7 billion.

Speech by Governor Lars Rohde at Investment and Pensions Europe conference 2019

Speech by Governor Lars Rohde at Investment and Pensions Europe conference, 3 December 2019.

Speech by governor Lars Rohde at the annual meeting of Finance Denmark 2019

Speech by governor Lars Rohde at the annual meeting of Finance Denmark 2 December 2019.

Climate change can have a spillover effect on financial stability

This analysis is a first step in Danmarks Nationalbank's efforts to understand how climate change may affect macroeconomic and financial stability. Climate change may pose risks to the financial sector and financial stability. Financial institutions should understand and incorporate these risks into their risk management, and financial regulation should reflect the actual risks. A sound financial sector can contribute to the transition to a green economy by ensuring continued allocation of capital.

The Industry's foreign subsidiaries contribute to current account surplus

Industrial Group's investments in foreign subsidiaries amount to kr. 558 billion in 2018 indicating that the industry is largely organized globally. Relatively few large groups are behind the majority of the investments.

Low coupon rate for more than half of the fixed-rate mortgage bonds

The 30-year fixed-rate convertible mortgage bonds amount to kr. 941 billion, of which 51 per cent in October have a coupon rate of 1.5 per cent or less. The trend towards bonds with lower coupon rates continues in the beginning of next year as more Danes will convert their mortgages into a loan with a lower coupon rate in January 2020.

Foreign investors maintain a large share of Danish mortgage bonds

In 2019, foreign investors bought many Danish 30-year mortgage bonds with a coupon rate of up to 1.5 per cent. They now own bonds with a low coupon rate for kr. 197 billion, corresponding to 41 per cent. The purchases should be seen in the light of the fall in market interest rates during the period and the refinancing boom which contributed to prepayment of many of the foreign investors' existing bonds with higher coupon rates. Foreign ownership of all 30-year mortgage bonds is largely unchanged at approximately 37 per cent.

Lower excess capital adequacy for the banks

The distance between capital requirements and own funds has been reduced for the largest Danish credit institutions in recent years. The lower excess capital adequacy implies increasing capital requirements, while capitalisation has been stable, the analysis Financial stability from Danmarks Nationalbank shows.

Lower interest income from households to banks

The banks' net interest income on loans and deposits to households was kr. 1.4 billion in October 2019 and kr. 16 billion over the past 12 months. Income has been steadily declining since 2012, where income was at kr. 22 billion.

21 per cent of household debt relates to sole proprietorships

At the end of October, Danish households' total bank and mortgage debt amounted to kr. 2,474 billion corresponding to 110 per cent of Danish GDP. The debt of the household sector covers debt of private customers and sole proprietorships. The bulk of the debt, kr. 1,950 billion (79 per cent), are primarily related to private customers, while the remaining kr. 524 billion (21 per cent) is related to sole proprietorships.

Financial Stability - Lower excess capital adequacy for the banks

The largest credit institutions’ results remain high, underpinned by low loan impairment charges and income from mortgage loan refinancing. Several institutions have launched initiatives aimed at securing future earnings. The largest credit institutions have reduced excess capital adequacy, and for a few it is low. The institutions should reconsider their capital targets to ensure an appropriate distance between capitalisation and capital requirements.

Banks are less resilient to stress

Danmarks Nationalbank conducts a stress test of the Danish banking sector twice a year. The stress test shows that some systemic banks breach their risk-based capital requirements in a severe recession scenario. The analysis further shows that the systemic banks will have to issue new MREL in substantial amounts in order to satisfy their requirements under stress.

Large returns in the first three quarters of 2019

In the three first quarters of 2019, the insurance and pension sector (I&P) returns totaled kr. 479 billion. This corresponds to a year-to-date, return on investment of just below 13 per cent. These figures are available in Danmarks Nationalbank's newly published quarterly statistics on insurance and pension.

Insurance and pensions twice the size of GDP

By the end of the third quarter of 2019, the balance of the insurance and pensions sector (I&P) totaled kr. 4,773 billion, which is approximately twice the size of Denmark's gross domestic product. Life insurance companies have, as the largest part of the sector, a total balance of kr. 2,663 billion, while the total balance of pension funds amount to kr. 1,938 billion. General insurance has a balance of kr. 172 billion. These figures are available in Danmarks Nationalbank's newly published quarterly statistics on insurance and pension.

Women have lower pension wealth than men

There is a significant difference in the pension wealth of men and women. The Danish women's pension wealth amounted to almost kr. 796,000 on average at the end of 2018. This is 25 pct. less than the average pension wealth of men equal to just over kr. 1,065,000. However, there are signs indicating that the difference is diminishing.

Working paper: Occupation-industry mismatch in the cross-section and the aggregate

I define occupations that are employed in more industries as “broader” occupations. I study the implications of broadness for mismatch of the unemployed and vacancies across occupations and industries. I empirically find that workers in broader occupations are better insured against industry-specific shocks. I build a general equilibrium model that uses occupational broadness as a microfoundation of mismatch. The model matches the empirical findings but predicts that mismatch cannot significantly contribute to aggregate fluctuations in the unemployment rate.

Pension companies will have large liquidity needs if interest rates rise

Pension companies' need for liquidity will increase when the sector has to meet the requirement for central clearing of interest rate swaps and other derivatives by 2023. Pension companies should prepare so as to be able to manage cash variation margin requirements at all times. In the event of substantial interest rate increases, the companies will need large amounts of cash to be posted as variation margin the following day.

Large corporate trades increase direct investments abroad

Danish companies increased their direct investments abroad by kr. 56 billion in the 3th quarter of 2019. The increase is mainly due to the fact that Danish DSV bought the Swiss transport company Panalpina for kr. 35.1 billion.

The Faroese economy - Labour market squeezed by very low unemployment

The Faroese economy has been in an upswing since 2014. Unemployment is now very low, and there is a risk that this may lead to overheating of the economy. The central government can increase the stability of the economy by pursuing countercyclical fiscal policy. The ageing of the population means that in the long term tax revenue will not be able to match government expenditure. This can be addressed by implementing reforms now.

Working paper: Liquidity Constraints in the U.S. Housing Market

We show that U.S. housing wealth is very illiquid despite all the instruments for extracting home equity available to homeowners. We come to this conclusion by studying the implications of liquidity constraints in a quantitative life-cycle model in which we explicitly account for key institutional details of the U.S. housing and mortgage markets. We find that mortgage market frictions that prevent homeowners from tapping into home equity are sizeable and that most homeowners keep their consumption low for precautionary reasons.

Working Paper: Risk and risk weights

The paper studies the relationship between the riskiness of banks' assets and their average risk weight. Risk weights explain about half of the variation in projected credit losses in the 2018 European Banking Authority stress test, and show a clear relationship with estimates of banks' asset volatilities. However, risk weights do a worse job of explaining future credit losses than do asset volatilities, especially for banks using internal models.

Foreign Exchange and Liquidity and Monthly Balance Sheet, October 2019

​In October 2019, the foreign-exchange reserve decreased by kr. 2.3 billion to kr. 442.7 billion.

Prices are rising less than many people think

Prices of food, clothing, restaurant meals, laundry, rent and other elements of household consumption are rising much less than many Danes think. In other words, the Danes overestimate the rate of inflation – but not as much as people in EU do on average. This appears from a Working Paper prepared by Kim Abildgren, Chief Adviser, and Andreas Kuchler, Senior Economist, from Danmarks Nationalbank.

Working Paper: Revisiting the inflation perception conundrum

The level of inflation perceived by Danish households persistently exceed observed inflation levels measured by official Consumer Price Indices. Accounting for even several of the factors usually put forward to explain the overestimation bias can only reduce it slightly. Food prices carry a larger weight in perceived inflation than in the official CPI, and we find clear seasonal effects in the inflation perception bias. The bias is also reflected in the households' expectations of the future inflation level, but we find a much smaller bias in the expectations regarding future changes in inflation rates.

Greenlandic economy - Strong growth, but reforms are required

Growth has been high for some years, a trend that is set to continue. This is mainly attributable to fisheries. Unemployment is very low, and large-scale airport investments in the coming years will increase pressures in the labour market. Despite government surpluses and modest government debt, there is a need to develop a broader business sector and strengthen government finances substantially in the coming years.

Quintupled wealth in 20 years

The market value of Danish households' investment fund shares is now 5.2 times what it was by the end of year 1999.

High return on foreign portfolio shares in 2019

Danish investors' foreign listed portfolio shares had a return of 17.7 per cent in the first nine months of 2019. Excluding exchange rate changes, the return was 15.3 per cent. In comparison, their Danish equities produced a return of 15.1 per cent.

High return on Danish bonds in 2019

Despite the historically low interest rates, the Danish bond market of kr. 4,309 billion has yielded a return of 3.2 per cent so far in 2019.

One fifth of corporate deposits are in currency

Danish companies' total deposits with banks are kr. 309 billion at the end of September 2019. One fifth of the deposits are in foreign currency, corresponding to kr. 60 billion. Many Danish companies, either directly or through foreign subsidiaries, have activities abroad in foreign currency. They may therefore need to be able to both withdraw and deposit amounts in accounts in different currencies.

The average mortgage rate is now below 1 per cent

The average effective interest rate on Danish customers' mortgage debt has been decreasing for a long time. In September, it was down another 0.07 percentage point and reached 0.93 per cent. For the first time ever it is below 1 per cent on average. Interest incl. administration fee are on average 1.76 per cent which is also a new historic low.

Capital buffer must be ahead of the financial cycle

If you want to hit a moving target, you must aim ahead of the target, not at its current position. This principle applies just as well when playing dodgeball at school as when shooting down enemy missiles in wartime. It also applies when policymakers determine the banks' capital buffer level required to weather hard times. They must look at the direction in which the financial development is moving, rather than at its current state.

Working Paper: Ahead of the Cycle

The paper describes how to conduct macroprudential policy in an environment where economic indicators move in a cyclical fashion, policy works with a lag, and there are adjustment costs to changing policy. It shows that policy instruments such as the countercyclical capital buffer should be set not only based on the present state of the cycle, but also on where the cycle is heading.

Speech by Governor Lars Rohde at SUERF conference in New York

Speech by Governor Lars Rohde at SUERF conference in New York, 16 October 2019.

Foreign direct investment passes through transit countries

Foreign direct investment, FDI, in Denmark often passes through the Netherlands and Luxembourg as transit countries. If the statistics are compiled by the country that ultimately controls the investments, the USA is the largest investor country. The USA ultimately accounts for almost 30 per cent of FDI in Denmark, which totalled kr. 700 billion in 2018.

Foreign direct investment often passes through transit countries

Nearly half of the kr. 700 billion of foreign direct investment, FDI, in Denmark passes through transit countries before reaching Denmark. The Netherlands and Luxembourg are the largest transit countries.

Betalingsservice Assessment

Danmarks Nationalbank has assessed Betalingsservice, which is owned and operated by Nets, against the standards for direct debit schemes established by the European Central Bank, ECB. Danmarks Nationalbank's overall assessment is that Nets has ensured that Betalingsservice extensively complies with the ECB requirements. At the same time, Danmarks Nationalbank has recommendations and remarks on how to strengthen Nets' management and operation of Betalingsservice. Inter alia, Danmarks Nationalbank recommends that Nets strengthen the compliance area and formalise its requirements for the critical suppliers' risk management. It is also remarked that the transparency of the fee structure will be enhanced if the firms clearly show their own fees to the consumers. Nets can be conducive to ensuring this. Danmarks Nationalbank oversees the payment and settlement systems in Denmark in order to promote safe and efficient settlement of payments, securities trades, etc. Betalingsservice is one of the solutions subject to this oversight.

Danmarks Nationalbank's comments on the Danish Economic Council's discussion paper, Autumn 2019

Speech by Governor Per Callesen at Green Climate Fund's 2019 Private Investment for Climate Conference, Republic of Korea

Speech by Governor Per Callesen at Green Climate Fund's 2019 Private Investment for Climate Conference, Republic of Korea, 8 October 2019.

Lower demand and increased competition

In Danmarks Nationalbank's lending survey for the 3rd quarter 2019, 5 of the 17 surveyed banks report that they have experienced lower loan demand from corporate customers compared to the previous quarter. In particular, the demand from new corporate customers has been lower, according to the banks. The banks report that lower demand applies to large as well as small and medium-sized corporate customers. At the same time, the banks report increased competition for these customers.

Working Paper: Modeling Persistent Interest Rates with Volatility-Induced Stationarity

We propose a new model for the term structure of interest rates, which embraces the extreme persistence observed in interest rate data. This is achieved by introducing so-called volatility-induced stationarity. We apply the model to U.S. Treasury bond yield data and show that volatility-induced stationarity improves estimation of term premia and forecasting of interest rates compared to existing models.

The market can see through media framing

Stock market investors react only on the objective facts and not the spin in media articles, a new working paper from Danmarks Nationalbank shows.

Working Paper: Seeing Through the Spin: The Effect of News Sentiment on Firms' Stock Market Performance

We show that Stock market investors react only on the objective facts and not the spin in media articles. We use natural language processing tools to compute the tone of 288 thousands articles written by Reuters between 2000 and 2018, and show that it predicts the short-term stock market performance of companies. However, by exploiting a combination of unsupervised machine learning and econometric techniques, we show that this effect is only due to the informational content of the article, and not the framing of that article. The market sees through media spin and can filter informational content from irrelevant tone.

Speech by Governor Lars Rohde at the anniversary conference on Banking & Supervision

Speech by Governor Lars Rohde at the anniversary conference on Banking & Supervision, 3 October 2019.

Foreign Exchange and Liquidity and Monthly Balance Sheet, September 2019

​In September 2019, the foreign-exchange reserve decreased by kr. 1.6 billion to kr. 445.0 billion.

More Danes carry the pension risk themselves

The Danes' total retirement savings amounted in the second quarter to kr. 3,661 billion as a consequence of large returns on stocks, bonds and interest rate derivatives. Movements in financial markets affect the pension assets more directly today than what has been the case previously.

International investment position sets new record

Denmark's international investment position, IIP, increased by kr. 176 billion in the 2nd quarter of 2019 and thereby reached a new record of kr. 1,616 billion. The increase was caused by the balance of payments surplus and value adjustments. Denmark's IIP constitutes 73 per cent of GDP.

Fixed-rate mortgage bonds at the highest level in 10 years

Fixed-rate mortgage bonds amount to 43 per cent of the Danish mortgage-credit market, totaling kr. 2,998 billion in August 2019. This is the highest share in 10 years.

Large investments in highly-rated bonds

Danish investors have bought foreign bonds for DKK 95 billion since January 2019. The majority of the purchases are bonds with a high credit rating (investment grade), including government bonds from the US and the Euro area as well as highly rated bank bonds from Sweden and Germany.

Who pays negative rates in the banks?

Interest rates have been low for a long time on a global scale, and banks are increasingly passing on the negative interest rates to their deposit customers. The banks have reacted at different rates, and the transaction affects different coustumer groups at differenct paces.

Record number of remortgagings and increased lending

The falling interest rate level in 2019 has meant that a record number of borrowers have converted their mortgage loans. Up to and including August this year, the mortgage institutions have disbursed loans to the Danes for a total of kr. 284 billion. The Danes' total mortgage loans have grown by kr. 63 billion for the same period.

Speech by Governor Lars Rohde at the CFA Society Denmark Conference 2019

Speech by Governor Lars Rohde at the CFA Society Denmark 1st Nordic Investment Conference 19 September 2019

Outlook for the Danish economy - Slightly lower growth in the coming years

The Danish economy has been in a boom phase in recent years. Over time, weaker growth abroad will affect the Danish economy, and prospects are for slightly lower growth rates over the coming years. The labour market is showing the first signs of a slowdown. The boom has evolved without considerable imbalances building up, and the Danish economy is well prepared for a slowdown. Slightly lower growth during a boom period is not an indication that fiscal policy should be eased.

Monetary and financial trends - Decline in interest rates and refinancing boom

In September, Danmarks Nationalbank lowered the interest rate on certificates of deposit by 10 basis points to -0.75 per cent. The interest rate reduction is a consequence of the reduction by the European Central Bank of its key monetary policy rate by 10 basis points. The krone rate remains stable, being slightly on the weak side of the central rate. Overall, financial conditions are accommodative and support the ongoing economic upswing. Declining interest rates have triggered a new refinancing boom during which many households have opted for lower-rate home loans. Credit growth remains moderate and has slowed slightly in 2019.

Trade conflict does not eliminate US current account deficit

The US has a current account deficit and president Donald Trump has an explicit goal of reducing it. However, new trade agreements and new tariffs do not remove the deficit, as the current account is basically determined by the balance between total savings and investments in the US. The growing public budget deficit, on the other hand, tends to increase the US deficit, but a large international demand for dollars helps keeping costs down.

The Danish economy is headed for slightly slower growth in the coming years

​The Danish economy has shown solid growth for a number of years, and that continued in the 1st half of 2019. This is Danmarks Nationalbank's conclusion in a new outlook for the Danish economy, forecasting an increase in the gross domestic product, GDP, of 1.8 per cent this year. Over the next two years, GDP is expected to rise by 1.5 per cent per year.

Mortgage refinancing supports private consumption

Falling mortgage rates have made mortgage refinancing attractive in order to reduce overall home financing costs. Many homeowners raise additional mortgage debt when refinancing. The additional funds are used for increased consumption and home improvements. However, some homeowners spend the funds on reducing other debt or building up a liquidity buffer.

Interest rate reduction

​Effective from 13 September 2019, Danmarks Nationalbank's interest rate on certificates of deposit is reduced by 0.10 percentage point. The lending rate, the current account rate and the discount rate are unchanged.

Speech by governor Lars Rohde at the annual meeting of Danish Auditors 2019

Speech by governor Lars Rohde at the annual meeting of Danish Auditors 10 September 2019

Macroeconomic and financial policy tools for climate change mitigation

Climate change is one of the greatest challenges of our time, requiring a large-scale economic transition in many areas, shows a review of the rapidly growing number of scientific articles and books on this subject, presented in a working paper.

Working Paper: Macroeconomic and financial policies for climate change mitigation: A review of the literature

Climate change is one of the greatest challenges of this century. Mitigation requires a large-scale transition to a low-carbon economy. This paper provides an overview of the rapidly growing literature on the role of macroeconomic and financial policy tools in enabling this transition.

Foreign Exchange and Liquidity and Monthly Balance Sheet, August 2019

​In August 2019, the foreign-exchange reserve decreased by kr. 1.5 billion to kr. 446.6 billion.

International payment cards gain ground

International payment cards have become significantly more prevalent over the past 10 years. This especially applies to international debit cards such as Visa Debit and Mastercard Debit. In the 1st half of 2009, international debit cards accounted for 4 per cent of the total number of card payments in Denmark against 27 per cent in the 1st half of 2019. Dankort and especially VisaDankort remain the Danes´ most used payment cards.

Who buys the 1 per cent mortgage bond?

30-year fixed-rate mortgage bonds with coupon rate of 1 per cent has since the introduction increased to kr. 116 billion. Of this, kr. 81 billion is issued in July alone, which is the largest monthly issue to date for 30-year mortgage bonds. Homeowners have converted mortgages to lower coupon rates to a record extent, in connection with the falling market rates.

Declining interest rate gains by locking in savings

Danish individuals' interest on deposits that are tied up for shorter or longer periods averaged 0.22 percent in July. The interest rate on this type of deposit has fallen by 1.1 percentage points since the beginning of 2015. By comparison, the Danish monetarypolicy interest rates have remained unchanged since the beginning of 2016.

Mortgage debt is rising in 88 municipalities

Danish households' mortgage debt has increased over the past year in 88 of 98 municipalities. The largest yearly increase again occurred in Copenhagen, where mortgage debt increased by 6.5 per cent.

Heightened risk of a global recession

Recession probabilities in the USA and the euro area have risen to high levels in recent years. A global downturn will affect a small open economy like Denmark. The risk of recession in Denmark has risen in line with the risk abroad, but the Danish economy is poised well-positioned to withstand a potential global economic downturn.

Strong business investment appetite

Over the past decade, business investment appetite has been in line with that experienced during previous crises and upswings. Investment has increased as spare production capacity has been absorbed. During the crisis and post-crisis years, investment was mainly constrained by high economic uncertainty and low foreign demand for Danish products. Since the mid-1990s, the growing weight of the service sectors in the Danish economy has structurally reduced investment.

Foreign Exchange and Liquidity and Monthly Balance Sheet, July 2019

​In July 2019, the foreign-exchange reserve decreased by kr. 1.5 billion to kr. 448.1 billion.

Increasing assets in passive investment funds

In the first half of 2019, total assets in passively managed equity funds have grown. This is due to an increase of kr. 7.4 billion in the value of their investments. The increase in assets has occurred even though investors have sold investment fund certificates for kr. 1.9 billion. The selloff in certificates happens after a considerable purchase of kr. 21 billion in 2018.

Foreign investors buy Danish shares in the first half of 2019

Foreign investors have bought listed Danish shares for kr. 4.3 billion in the first half of 2019. Foreign investors own a total of kr. 1,345 billion Danish shares corresponding to an ownership of 52 per cent of the Danish stock market. Foreign investors have owned more than half of Danish shares since the beginning of 2014.

Positive return on Danish shares in the first half

Danish listed shares gave investors a positive return, including dividends totalling 15.0 per cent in the first half of 2019. Overall, share prices have increased by 13.1 per cent, while dividend payments thus contribute by 2.0 per cent to the total return.

Increased instalments, but reduced repayment rate

Instalments on Danes' mortgage loan were kr. 18.8 billion in the first half of the year. This is kr. 118 million more than the previous six months, and 2019 will thus be another record year. The figure corresponds to an annual repayment rate of 2.31 per cent. Compared to the previous six month, the repayment rate has declined by 0.02 percentage points, despite the fact that the instalments amount has increased.

The majority of Danes' deposits receive zero interest

In April, Danish private customers increased their deposits in large and medium-sized banks to kr. 921 billion. Of this, 55 per cent had an interest rate of 0 per cent. The remaining 45 per cent of the deposit had a positive deposit rate, on average 0.65 per cent. Overall, private customers' average deposit rate was 0.3 per cent in April.

Danish investors bought US shares in 2019

Danish investors have bought a large number of North American shares for a total of kr. 16 billion since January 2019. Contrariwise, Danish investors have sold European shares, mainly caused by A.P. Møller-Maersk's sale of their stocks in French Total.

Danes invest abroad via investment funds

Private Danes had invested kr. 463 billion of their free funds in securities by end-May 2019. Of these, kr. 207 billion is invested in investment funds. An investor buying a share in an investment fund owns a part of the fund's securities holdings. Going over securities owned through investment funds gives a more precise picture of their investments, cf. chart below.

Banks are increasing competition for the robust corporate customers

In Nationalbanken's lending survey for the second quarter of 2019, 4 of the 17 surveyed banks report that competitors' behaviour contributes to easing credit standards towards corporate customers. The 4 banks are both medium and large and together constitute 21 per cent of total lending to corporate customer.

Foreign Exchange and Liquidity and Monthly Balance Sheet, June 2019

​In June 2019, the foreign-exchange reserve decreased by kr. 2.1 billion to kr. 449.6 billion.

Central government borrowing strategy in the 2nd half of 2019

The target for issuance of domestic government bonds in 2019 is increased to kr. 75 billion due to an increase in the central government's purchases of government-guaranteed mortgage bonds. The expected average sales of government bonds per auction are around kr. 3 billion at market value. The on-the-run issues will remain unchanged and focus will be on issuance in the 2-year and 10-year nominal bonds.

Fixed rate loans has the lead in 24 municipalities

Over the last year, there has been a doubling of the number of municipalities, where the homeowners' mortgage loans with a fixed interest rate excess variable-rate loans. The number has thus increased from 12 to 24 municipalities.

Denmark's international investment position reaches new high

Denmark's international investment position, IIP, increased in the first quarter of 2019 by kr. 66 billion and thereby reached a new height of kr. 1,469 billion. This corresponds to 65 per cent of GDP.

Stock market comeback re-elevates Danes' financial wealth

The financial wealth of Danish households reaches a new record. Rising equity markets and a large savings surplus contributed to the Danes' wealth increasing by a total of kr. 306 billion in the first quarter of 2019. The increase, which is the largest since 2015, thus more than offset the decline last year, which raises household wealth to new heights.

The natural real interest rate in Denmark has declined

The natural real interest rate has declined since the 1990s. An important explanation is demographic trends in Denmark and abroad, which can be expected to continue in the coming years. Among other factors, lower natural interest rates have prompted central banks in several countries to apply unconventional monetary policies in order to stimulate the economy and increase inflation. Spillover effects from similar measures could affect the Danish economy in the future.

Danmarks Nationalbank's comments on the Danish Economic Council's discussion paper, Spring 2019

Working Paper: Real Effects of Relaxing Financial Constraints for Homeowners: Evidence from Danish Firms

We study how the introduction of interest-only mortgages in 2003 affected job creation and the skill composition of the workforce over the business cycle. The reform significantly increased household expenditure and firms reacted to this demand shock by creating jobs. These positions, however, are classified as low-skilled occupations, filled by younger and less educated workers who face earlier separations and a higher degree of unemployment ex-post.

A small number of participants dominate the interbank market

The analysis looks at the complex network created when the financial institutions exchange many thousands of transactions across the Danish interbank market. The analysis shows that there is a core consisting of a few institutions which are important in terms of spreading liquidity, and that a small number of institutions alone connect isolated institutions with the rest of the network. The interconnectedness of the network emphasise the importance of having robust central participants.

Adjustment of the model for allocating current-account limits to banks and mortgage-credit institutions

Foreign Exchange and Liquidity and Monthly Balance Sheet, May 2019

​In May 2019, the foreign-exchange reserve decreased by kr. 1.2 billion to kr. 451.7 billion.

Oversight of the financial infrastructure 2018

The report presents the conclusions from Danmarks Nationalbank's oversight of the Danish payments infrastructure in 2018. Two major system changes were introduced with the implementation of Kronos2 and the migration of kroner to the trans-European securities platform, T2S. The core payment and settlement systems and most important payment solutions extensively comply with international standards for efficiency and security. Cyber risk management was still a focus area of Danmarks Nationalbank's oversight. The maturity of the systems' cyber security efforts varies.

Declining fraud with Danish payment cards

In the first quarter of 2019, fraud with Danish pay-ment cards for 46 øre for every 1,000 kr. paid. Based on the number of transactions, this corresponds to one fraud per 5,000 transactions.

Purchase of foreign bank bonds

In total, Danish investors have purchased foreign bonds for kr. 70 billion since 2018. It is especially bank bonds with a high credit rating, AAA rating, which in particular Danish pension funds, investment funds, have bought. Conversely, they have sold for-eign government bonds, primarily German.

Fall in dividends to banks' shareholders

In the first four months of 2019, Danish listed banks paid kr. 9.2 billion to their shareholders in dividends. This corresponds to a decrease of kr. 2.3 billion compared to the same period last year. The dividends relate to the financial year 2018 and are typically paid to the shareholders in connection with the general assemblies in March and April.

Danes choose loans with low administration fees

The average administration fee on the Danes' mortgage loans is decreasing because the Danes choose more secure loan types for their financing – especially fixed-rate loans and loans with instalments. The administration fee is now, on average, 0.87 per cent, which corresponds to a monthly payment before tax of kr. 723 per kr. million borrowed.

Danes now have over kr. 900 billion in the banks

In April, total bank deposits by Danish private customers reached kr. 921 billion, corresponding to an increase of kr. 46 billion over the past year. In March and April alone, deposits increased by kr. 26 billion due to pay-outs of dividends, excess tax and holiday pay.

Prospects of lower earnings and higher capital requirements for banks

The systemic credit institutions' results remain high, underpinned by low loan impairment charges since 2010. A substantial dampening of economic growth would lead to higher loan impairment charges and consequently lower earnings in future. The requirements for banks' capital structure are likely to be tightened considerably in the coming years. This may put pressure on the systemic credit institutions' excess capital adequacy if they fail to build up further capital adequacy beforehand.

Banks face new requirements in the stress test

Danmarks Nationalbanks conducts a semi-annual stress test of the Danish banking sector. The stress test shows that the systemic banks satisfy their risk-based capital requirements and the leverage ratio requirement in a severe recession scenario. The analysis also looks at the banks' ability to satisfy MREL under stress and shows that the systemic banks depend on being able to continue to issue MREL-eligible instruments in order to satisfy the requirement.

Lower growth may cause bank earnings to fall

Economic growth continues in Denmark and many other parts of the world, but the pace is set to slowdown in the coming years. A substantial dampening of economic growth would lead to higher loan impairment charges and consequently lower earnings in the banks in the future, Danmarks Nationalbank points out in its semi-annual analysis of financial stability in Denmark.

Working Paper: The effects of macroprudential policies on house price cycles in an agent-based model of the Danish housing market

In this paper an agent-based model is used to investigate how tightening loan-to-value and loan-to-income ratios affects house price cycles. The use of an agent-based model allows for the analysis of the effects of these policies on heterogeneous households. I find that these policies reduce house price cycles in a non-linear way that depends crucially on the distribution of households and highlights the importance of macroprudential policymakers taking into account the distributions of households.

Working Paper: Multiple credit constraints and time-varying macroeconomic dynamics

I build a DSGE model where households face a loan-to-value (LTV) constraint and a debt-service-to-income (DTI) constraint. From an estimation of the model, I infer when each constraint was binding over the 1975-2017 timespan in the U.S. I also infer that DTI standards were relaxed during the mid-2000s credit boom. In the light of this, the boom could have been avoided by tighter DTI limits, but not by tighter LTV limits. The role of multiple credit constraints for the emergence of nonlinear dynamics is corroborated by county panel data.

Consultation response regarding potential candidates for a new risk-free reference rate for the Danish krone market

Danmarks Nationalbank considers it positive that a new reference rate will be based on actual transactions rather than quoted prices, as the underlying transactions will enhance confidence in the reference rate. With the aim of clarification and of strengthening confidence in reference rates in Denmark, the new reference rate should be implemented rapidly, and the existing one should be phased out. It is essential that the sector now continues this work. Solutions still need to be found for reference rates for longer maturities and for migrating existing contracts from old to new reference rates. Such solutions should match international best practice.

Danish companies increase foreign direct investments abroad

Danish investors increased their outward direct in-vestments abroad by kr. 6.3 billion in the first quar-ter of 2019.

Liquidity stress test shows that Kronos is resilient

Kronos is Danmarks Nationalbank's payment system for large-value time-critical payments and it is the heart of the Danish financial infrastructure. The analysis assesses the robustness of the system, measured as the change in participants' liquidity needs as well as their ability to settle payments in a timely manner when the system is exposed to stress in three different scenarios: (1) One large participant cannot submit payments for a full business day, (2) the money market is inaccessible, and (3) the participants' access to intraday credit is reduced. The analysis shows that the system is resilient in all three scenarios.

Danes pursuit medium risk investments

Danish private investors primarily choose medium-risk when investing through investment funds. Since the beginning of 2018, Danes' net investments in these funds total kr. 15.2 billion. Conversely, they sold either low- or high-risk investment fund shares for a total of kr. 7.3 billion over the same period.

Foreign Exchange and Liquidity and Monthly Balance Sheet, April 2019

​In April 2019, the foreign-exchange reserve decreased by kr. 1.2 billion to kr. 452.9 billion.

Increasing equity prices support investments

This analysis shows how fluctuations in equity prices affect business in-vestments in fixed capital via a "Tobin's Q channel". The main conclusion is that an increase of 10 per cent in the prices of Danish listed firms leads to an increase of 1.8 per cent in those firms' investments.

The Pension sector buys foreign shares

The insurance and pension sector, I&P, bought foreign portfolio shares and investment fund shares for kr. 2.9 billion in March. With almost 60 per cent, I&P own the majority of the Danes' total investments in foreign shares, etc., which amount to kr. 1,884 billion in total.

Large decline in mortgage bond duration

A fall in the long-term interest rates in March contributed to a decline in the average duration of fixed-rate callable mortgage bonds of 1.8 years to 3.1 years. Since the end of last year the duration has fallen by 2.8 years. Callable bonds total kr. 1,043 billion.

Mortgage rates reach new record-low level

The Danes' average mortgage rate including administration fees is below 2 per cent – precisely at 1.97 per cent. The interest rate including fees of 1.69 per cent on new mortgages issued in March is also a new record-low.

Opening of 0.25 per cent bullet loan 2022

Danmarks Nationalbank joins the Network for Greening the Financial System

​Danmarks Nationalbank has become a member of the Network for Greening the Financial System, NGFS, a group of central banks and supervisory authorities.

Lending survey 20180408

In Danmarks Nationalbank's lending survey, the banks reply that in the first quarter of 2019 credit standards for businesses have been unchanged (net figure is -0.5). Over the past 5 years the credit standards for businesses have eased overall.