Funding framework
Nykredit is the world's largest issuer of covered bonds backed by mortgages on real estate. Nykredit also issues other debt instruments, such as Additional Tier 1 (AT1) capital, Tier 2 capital, bail-inable senior debt etc. Read about issues, the Danish mortgage model, technical standards, structure of capital centres etc.
Issuance
The vast majority of Nykredit’s covered bond are issued by way of daily tap issuance into the Danish domestic market. By virtue of the match funding of the mortgage lending, Nykredit is active in the market every day for the purpose of issuing new bonds to fund new lending or refinance maturing bond and to buy back bonds in order to facilitate extraordinary loan redemptions.
The Danish mortgage model
Nykredit uses the traditional Danish mortgage finance model for specialised mortgage banks. The model is based on match funding with a one-to-one cash flow relation between the payments of interest and principal from the customer and the interest and principal payment to the investors owning the bonds that finance the loans.
Structure of capital centres
The covered bonds are issued from a so-called capital centre (cover pool).
The cover pool assets of Nykredit's capital centres mainly consist of loans secured by mortgage on (mainly Danish) real estate. They also include securities and other assets used, for instance, to meet the statutory capital requirement.
Negative covered bond yields
Since May 2015 Nykredit has offered mortgage loans funded by variable-rate bonds the coupons of which may turn negative. Variable-rate bond coupons turned negative for the first time at the interest rate fixing on 1 July 2015.
Nykredit has adjusted its procedures in relation to bonds to allow for negative interest. Read more about the models used to handle negative interest.