This morning, the German 3-month bond yield is -0.558% while the 10-year bond yield is -0.593. Thus 10-year bonds yield less than 3-month bonds (inversion), while the whole curve is negative.

Never Cheaper to Borrow

Meanwhile, Jyske Bank, the third-largest bank in Denmark announced it will Pay Customers to Take Out Mortgages by Offering Negative Interest Rates.

Jyske Bank will offer prospective homebuyers an interest rate of -0.5%.

“It’s never been cheaper to borrow,” said Lise Nytoft Bergmann, chief analyst at Nordea Bank’s home finance division in Denmark, to Bloomberg. “We expect this to contribute to driving home prices higher.”

20-Year Loan

Need a longer term? No problem.

Nordea Bank Abp offers Zero-Interest Rates for 20 Years.

Danish 10-Year Bonds

Image placeholder title

Voluntarily Losing Money

Paying people to borrow is a money-losing operation and banks don't voluntarily lose money.

So, how are banks not losing money?

Interest on Excess Reserves

Neither article explained but it likely has to do with interest on excess reserves and/or Central Bank policy.

In the Eurozone, which Denmark is not a part of, the ECB charges interest on excess loans unless banks show a willingness to lend. The Eurozone rate is -0.4%.


Reuters reports ECB Would Rather Pay Banks to Lend than Cut Charge on Idle Cash.

Draghi said policymakers were considering the need to mitigate the impact of the ECB’s negative deposit rate on lenders’ profits, a coded reference to a tiered system where some excess reserves are exempted from that charge.

But this option, which is being studied by the ECB’s staff and has already been adopted by countries such as Japan and Switzerland, met with widespread scepticism on the Governing Council, the sources said.

A similar policy for Denmark could be in place.

Denmark 3-Month Yield

The Danish 3-month yield and central bank funds rate at -0.65% provides another possible explanation.

Banks would rather lend at -0.5% than lose 0.65% on excess reserves.

Monetary Madness

In the US, the Bernanke, Yellen, and Powell paid interest on excess reserves thereby slowly bailing out the banks over time.

Europe went the opposite direction punishing banks and weakening the banking system with negative interest rates.

Recall that excess reserves are a function of central bank attempts to force more debt into the system via QE and other central bank operations.

But excess reserves just shift location when a bank makes loans because loans inevitably get deposited elsewhere.

Trapped in a Box

The central bank effort is monetary madness but Trump wants the Fed to march to the same mad tune.

For further discussion of this economic madness, please see Fed Trapped in a Rate-Cutting Box: It's the Debt Stupid

Mike "Mish" Shedlock

Central Bank Sponsored Madness: Inversions on Negative-Yield Bonds

German bonds are inverted in 19 places despite the fact that the German bonds have a negative yield for 13 years.

Monetary Madness Won't Stop and Bond Yields Won't Bottom with First the Rate Cut

History suggests bond yields have much further to fall.

Japan’s Negative-Yield, Inverted Bond Market Close to Breaking Point

Japan’s dysfunctional bond market is not only inverted between three month and eight years, it also sports negative yields out to 10 years.

Negative Interest Rate Mutiny in Germany, Japan

Banks in Japan and Europe are fed up with central bank negative interest rate policies that cost the banks money.

Why the Yield Curve Inverts in One Simple Picture

The yield curve inverts when the Fed keeps hiking in the face of a slowdown.

Negative Yield Curves to Infinity and a Reader Question Regarding Fraud

The entire German yield curve is negative for 30 years. Japan is poised to join the club.

Yield Curve is Inverted for Nearly 25 Years

Using the Fed Funds Rate as the baseline overnight duration, the yield curve is inverted for nearly 25 years.

Zombification Perfected: Negative Yield Junk Bonds Take Hold in Europe

Expectations of further monetary stimulus depress yields. There are now 14 junk bonds in Europe with a negative yield.

Yield Curve Steepened Since January 3 but Portions Remain Inverted

On Jan 3, portions of the yield curve inverted with the Fed Funds rate. That's gone, but other inversions remain.