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Copenhagen Stock Exchange: Focus: The Borrowers Return To Fixed-Rate Loans

Date 13/08/2002

The borrowers' desire to choose financing with an adjustable rate has fallen sharply lately, and all death sentences imposed on fixed-rate loans have thus shown to be groundless.

In issue no. 25 of Focus, Head of Fixed Income Research Kåre Hahn Michelsen, Nykredit Markets, describes the latest months' development in new issues of mortgage loans. The borrowers' hesitation about choosing adjustable short-rate loans is due to partly the rising uncertainty about the world situation, partly the homeowners' active debt management.

At present, mortgage bonds are high-priced compared with government bonds. Even though the spread between government bonds and mortgage bonds has widened throughout the summer, mortgage bonds have not become cheaper than government bonds, since the widening was due to the falling yields.

In the short term, the author recommends underweight of mortgage bonds because of the continued unrest on the financial markets and the popularity of the callable bonds with the borrowers, which results in a larger supply. However, in the long term, the author expects that a rising yield level and a falling supply will support the mortgage bonds.

Read Focus no. 25 at www.xcse.dk/uk/nyt/Borsfokus/Borsfokus.asp.