
20-Year Mortgages Hit Zero for First Time in Danish Rate History - ptr
https://www.bloomberg.com/news/articles/2019-08-07/nordea-offers-20-year-mortgages-at-zero-interest-as-rates-plunge
======
yasp
This seems like a good place to ask the question: how is it that we're seeing
$15T of bonds worldwide trading with negative yields? [1]

TFA suggests this is due to structural factors--institutions that are required
by law to own AA/AAA bonds. Is this some deficiency in the law or corporate
governance, that cash in this circumstance isn't considered a substitute for a
negative-yield bond? Its net present value would be greater. I can't imagine a
scenario in which you would come out financially ahead from owning a negative
yielding bond instead of cash.

[1] [https://www.cnbc.com/2019/08/07/bizarro-bonds-negative-
yield...](https://www.cnbc.com/2019/08/07/bizarro-bonds-negative-yielding-
debt-in-the-world-balloons-to-15-trillion.html)

~~~
throw0101a
> _This seems like a good place to ask the question: how is it that we 're
> seeing $15T of bonds worldwide trading with negative yields? [1]_

We've been on a 10 year run of growing economies after the Great Recession and
stocks/equities have price-to-earning (P/E) ratios that are really high—as
high as what they often were before other corrections and/or recessions:

* [https://www.macrotrends.net/2577/sp-500-pe-ratio-price-to-ea...](https://www.macrotrends.net/2577/sp-500-pe-ratio-price-to-earnings-chart)

* [https://www.starcapital.de/en/research/stock-market-valuatio...](https://www.starcapital.de/en/research/stock-market-valuation/)

> _Here’s the price-earnings ratio for the S &P 500 since World War II. Right
> now it’s hovering a little above 25. In the past three decades, it has never
> reached that point without leading quickly to either a deep correction or a
> full-blown recession._

* [https://www.motherjones.com/kevin-drum/2017/12/raw-data-the-...](https://www.motherjones.com/kevin-drum/2017/12/raw-data-the-sp-500-price-earnings-ratio/)

So people are worried about equities and "running to safety" of bonds. But
there is a lot of demand for bonds, but only a limited supply: when
governments tend go to the market and ask for money, usually private investors
ask " _what are you willing to pay me for the use of my money?_ ". And private
investors get a positive return.

But now it's the opposite: private investors are saying " _I 'm so worried
about my money that I am willing to pay_ you _, the government, to hold onto
it_ ". And so private investors get a negative return—because they're worried
having the money in (stock) market could be worse than a predictable negative
rate from a government.

Between the Summer 2007 and November 2008 the S&P 500 dropped by (IIRC) >40%
during the fiscal crisis before the Great Recession: a bond "returning" -1%
isn't too bad in comparison.

~~~
refurb
PE ratio has declined to 22 since that article was written.

[https://www.multpl.com/s-p-500-pe-ratio](https://www.multpl.com/s-p-500-pe-
ratio)

~~~
throw0101a
2018 was quite the year:

> _After closing at an all-time high on September 20, the S &P 500 entered a
> bear market on Christmas Eve. The technical definition is a 20% peak-to-
> trough drawdown, but I’m willing to give this 19.8% fall the benefit of the
> doubt._

* [https://awealthofcommonsense.com/2018/12/the-forgotten-bear-...](https://awealthofcommonsense.com/2018/12/the-forgotten-bear-markets/)

The S&P 500 then hit another all-time high this year (2019), before dropping
back down recently. The US/Trump sabre rattling and introducing tariffs/trade
wars isn't helping with confidence either:

* [https://www.nytimes.com/2019/08/07/opinion/tariff-tantrums-a...](https://www.nytimes.com/2019/08/07/opinion/tariff-tantrums-and-recession-risks.html)

* [https://fred.stlouisfed.org/series/T10Y3M](https://fred.stlouisfed.org/series/T10Y3M)

Various other stock markets are experiencing drama as well:

* [https://www.starcapital.de/en/research/stock-market-valuatio...](https://www.starcapital.de/en/research/stock-market-valuation/)

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aantix
Can you get a Danish loan to fund the purchase of a foreign (ehem U.S.)
residence?

~~~
aczerepinski
This was my reaction too. If any Danish banks are reading this and want to
make a juicy half percent, hit me up.

~~~
howlin
You'd be taking on currency exchange risk, as the Danes will want to loan you
Euros but you'll likely be paying back the loan in USDs.

~~~
alkonaut
They'll most likely want to loan you some DKK, not EUR.

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xchaotic
Why would people not buy extra properties with these mortgages “just in case”?
Especially the 10 year one seems low risk and worst case you have a property
after 10 years?

~~~
viburnum
With good regulation (unlike the US before the bubble popped) low rates are
not a problem.

~~~
gridlockd
[citation needed]

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p1esk
Negative rate morgages seem pretty crazy to an American eye! :)

~~~
alkonaut
Zero or negative rates for consumer loans is crazy _everywhere_. But so is
having a fixed 30year mortgage of 3-5% when the interbank rates are near zero.

~~~
vonmoltke
Why? The bank could loan that money to the US Government for 2%-3% over that
same lock-up period. What does the funds rate have to do with it?

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Shaban
I'm suprised no one has mentioned gold. You can buy physical gold and store
it. Doesn't take much space

