Danish banks warn off hedge funds

The biggest banks in Denmark’s €402bn mortgage market say hedge funds looking for ways to bet against the industry are setting themselves up for losses.

Europe’s largest issuer of mortgage-backed covered bonds, Nykredit Realkredit, says speculation the AAA-rated Danish economy may be headed for a debt crisis ignores some basic facts. Near record-low yields at mortgage bond auctions that started last week are proof that most investors agree, according to the bank.

“Funds can speculate on whatever they want,” Soeren Holm, chief financial officer at Nykredit, said. “But I don’t think it’s good business to speculate against Denmark.”