Argentum

Interest rates The DKK-EUR peg ties the interest rates determined by the Danish central bank, Danmarks Nationalbank, to those of the ECB. In view of Denmark’s large current account surplus and the strong demand for Danish government bonds, it is plausible that Danish interest rate levels will remain lower than those of the ECB for a significant length of time. In Q1-Q3 2017, the Danish benchmark yield, defined as the yield on a 10-year government bond, dropped from 0.32% to 0.28%. By comparison, the short-term interest rate dropped from -0.24% to -0.27% in the same period. The medium-term outlook remains for sustained low short- term interest rates as the economies of Europe are still in a recovery phase, as reflected in macroeconomic forecasts of low inflation rates and moderate GDP growth. Eurozone inflation is currently below the 2% target stipulated by the ECB.

Short-term and long-term interest rates (3M and 10-year), Denmark vs. eurozone

0% 1% 2% 3% 4% 5% 6%

-1%

08 09 10 11

12 13 14 15 16 17YTD

Eurozone (3M)

Eurozone (10-year gov. bond)

Denmark (3M)

Denmark (10-year gov. bond)

Sources: ECB, Danmarks Nationalbank and NASDAQ OMX

PROJECT ARGENTUM

Danish mortgage system The market for Danish investment properties benefits from a strong and transparent mortgage system, allowing for loan-to- value (LTV) ratios of up to 80% on residential real estate. The mortgage system works by allowing for such LTV ratios through the issue of covered bonds, which are among the most liquid and secure asset classes in Europe, typically boasting AAA-ratings. It is possible to obtain financing at flexible or fixed rates, and compared to most other countries, Denmark has exceptionally low financing costs and a highly transparent cost structure. Interest rates remain very low, with flexible interest rates currently around the 0.00% mark and fixed interest rates of some 2.50%, both with bonds selling at market prices close to face value. Interest rate margins are typically somewhere between 40 and 100 bps for residential properties, depending on LTV and the interest-only period.

Core properties generating stable long-term cash flows, such as well-located residential properties, usually qualify for easy access to attractive mortgage financing in Denmark.

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