Danish mortgage bonds prove resilient yet again

Jonathan Boyd
Danish mortgage bonds prove resilient yet again

The Danish mortgage bonds market has shown its resilience thus far to the Coronavirus crisis that has swamped Europe's capital markets, sending equity prices to lows not seen since the global financial crisis.

However, as suggested by data from FE fundinfo, while indices such as the FTSE 100, CAC 40 and DAX 30 have been falling rapidly in recent weeks, the Danish mortgage bond asset class (covered bonds) has proven remarkably resilient - just as it did the morning after Lehman Brothers went bust.

According to trade association Finance Denmark: "No Danish mortgage bank has ever defaulted on a covered bond. There is one example of late payment back in the 1930s, however."

It is an industry that has survived over two centuries of disasters and warfare afflicting the country, yet has still survived. The first mortgage associations were formed following a fire in 1795, when an estimated quarter of houses in the city burned to the ground. Mortgage bonds were issued to fund the loans.

3mth return in euros

12m risk/return in euros

12m return in euros

3yr return in euros

(Charts source: FE fundinfo)

Jonathan Boyd
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Jonathan Boyd

Editorial Director of Open Door Media Publishing Ltd, and Editor of InvestmentEurope.