COPENHAGEN, Feb 2 (Reuters) - Denmark’s Nykredit said on Monday it would not issue new mortgage-backed bonds with negative rates because it is unclear how such bonds should be handled.
“The approach to negative rates is a question of fundamental mortgage industry principles. The main question is whether borrowers should get money for borrowing money,” Nykredit said in a statement.
“...As the matter remains unresolved, we do not wish to issue 1-year and 2-year reset ARMs (adjustable rate mortgages) with negative interest rates,” it said.
Nykredit, one of the largest private bond issuers in Europe, called for a market consultation on how to handle such bonds. Rates on the bonds, which help finances Danish mortgages, turned negative after a series of central bank rate cuts.
Reporting by Ole Mikkelsen; editing by Sabina Zawadzki