The National Bank of Denmark published an analysis of the Danish krone secured money market, focusing on repo agreements and how the market supports liquidity management, bond market-making and the transmission of monetary policy rates into money market pricing. The review draws on the central bank’s transaction-based money market statistics, compiled from daily reports by the nine largest banks active in the market. The analysis estimates average daily turnover at around DKK 42 billion, split between approximately DKK 32 billion in repo loans and DKK 10 billion in repo deposits, with volumes that can spike materially on individual days. Outstanding bank repo lending rose over the reporting period and stood at around DKK 500 billion by end-February 2025, while banks remained net providers of liquidity to non-bank counterparties, particularly Danish insurance and pension companies and investment funds, which together account for about 75% of outstanding volumes. Mortgage bonds make up most collateral (88%), with Danish government bonds at around 11%; repo rates are, on average, about 7 basis points higher when secured by mortgage bonds than by government bonds, and banks’ repo lending rates have averaged around 15 basis points above their repo deposit rates. The note also highlights structural features and risks, including a concentrated network of large banks, extensive rolling of positions (79% of outstanding agreements assessed as refinanced), and the role of short-dated interbank repos in sourcing specific bond series, with roughly half of interbank activity cleared via a central counterparty.
National Bank of Denmark 2025-05-08
National Bank of Denmark publishes secured money market analysis showing high Danish krone repo activity and refinancing risk
The National Bank of Denmark analyzed the Danish krone secured money market, emphasizing repo agreements' role in liquidity management and monetary policy transmission. Based on transaction data from the nine largest banks, the study reports an average daily turnover of DKK 42 billion, with mortgage bonds as predominant collateral. It highlights structural risks, such as a concentrated banking network and extensive position rolling, with significant interbank activity cleared through a central counterparty.