Bonds

​In relation to GDP, the Danish bond market is relatively large. Prior to the introduction of the euro, the Danish bond market was one of Europe's largest.

The Danish market for mortgage bonds and covered bonds is also characterized by a very large number of series. In January 2012, 2,116 bond series were listed on the Danish stock exchange.

Issuers

There are various bond issuers. Two of the biggest are the state and the mortgage banks. Danmarks Nationalbank (the Danish Central Bank) issues government bonds to finance the state's gross cash balance minus repayments of debt. As the public debt has fallen, it becomes increasingly important that the issues will be concentrated on fewer and more liquid series, which can be internationally traded on equal terms with the most liquid series in euro countries.

Mortgage lenders offer financing of real estate. It is financed from the issuance of convertible bonds, adjustable rate loans, guarantee loans and the like. In addition, one selects whether the loan must be in Danish kroner or euro, and whether it should be interest-only or not.
 
The callable bonds usually have a maturity of up to 30 years. It is unusual in other countries to issue bonds with long maturities. In 1996, the mortgage lenders introduced the so-called adjustable-rate mortgages (RTL in Danish), which is based on non-callable mortgage bonds. This is based on mortgage bonds with shorter maturities where the interest rate for the borrower may change over the loan term. However, it is only in recent years that funding through RTLs really has become widespread, and loans granted as RTLs has at times represented half of the new emissions.
 
In 2003, there was a change in the law after which mortgage lenders, from 1 October this year, have been offering mortgages with a built-in interest-only period of up to 10 years. Interest-only loans can have a fixed or variable interest rate. Loans are offered where the grace period is placed in the beginning of the loan period, as well as loans where the interest-only can be turned on or off as the borrower wishes. An interest-only loan can be refinanced with a new interest-only loan, so that the grace period thus can be extended beyond the 10 years.

In autumn 2004, the so-called guarantee loans were introduced. Roughly, guaranteed loan are a combination of callable, fixed rate mortgages and adjustable-rate mortgages – since it is a case of a variable-rate (the interest rate is fixed twice a year) mortgage loan with an interest rate cap. At present, two variants of cap loans are offered - with and without automatic conversion to a fixed-rate callable mortgage bond loan.
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