Basel Committee on Banking Supervision regulations require lenders to dump the country's top-level mortgage debt

Denmark said that the Basel Committee on Banking Supervision regulations require lenders to dump the country's top-level mortgage debt to meet liquidity needs and can destroy the world's third largest bond market.

The Nordic country is planning to defy the rules, published on 16 December and Finance Minister Brian Mikkelsen has had complaints from Denmark to the European Commission.

"It's almost impossible to see how our financial system as we know it will continue to function" if the liquidity ratio Basel coverage applies Arnth Ane Jensen, director of the Copenhagen-based Association of Danish Mortgage Banks, in a December 21 interview.

Denmark lenders, which occupy more than half the country's 490 billion U.S. dollars of mortgage bonds, would be forced to sell shares to meet Basel cover 40 per cent in the use of securities as liquid assets, Arnth Jensen said. Basel, says the relationship will ensure that banks have more liquid assets to guard against financial stress and not a sovereign debt ceiling.

The rule is a "notion of the grotesque - it shows the committee did not really understand the Danish market for mortgage bonds," said Jensen Arnth.

mortgage bond market in Denmark is about 1 1 / 2 times the size of the country's economy and more than seven times larger than the government bonds market, according to the central bank. The nation, which is one of the 27 Basel Committee member, is one of the most vocal critics of the rules on liquidity.

2015 Deadline

Government of Denmark and lenders are waiting to see how much the EU will change the rules of application is launched next year. Lead time is 2015.

The Basel Committee is prepared if "necessary" for "doing reviews of specific components" of the rule of liquidity until mid-2013, the group said in a report published on its website last week.

"This is not the final word," said Jensen Arnth. "We, of course, we hope that something will happen when the rules are applied in the European Union."

Elsewhere in credit markets, the extra yield investors demand to own corporate bonds around the world rather than similar-maturity government debt remained unchanged at 170 basis points, or 1.7 percentage points, according Bank of America Merrill Lynch Global Broad Market Corporate Index. The average yield of 3.94 percent.

Bond mutual funds had the largest customer of the recall of more than two years as a flight from fixed income investments accelerated. Leveraged loan prices rose for a third day, reaching the highest level in six weeks.

Retirement Fund

the U.S. bond funds experienced the withdrawal of $ 8,620,000,000 for the week ended Dec. 15, compared with $ 1,660,000,000 the week before, according to a press release from the Investment Company Institute, a trade group based in Washington . retreat last week were the highest since the period ended October 15, 2008, when investors pulled $ 17,600,000,000 bond funds.

Most of the money was removed, probably by block institutional investors seeking higher returns by buying bonds directly, rather than through funds, said Geoff Bobroff, a consultant based in East Greenwich, Rhode Island.

"I would say that most retail investors stay put because they are not seeing money elsewhere," he said in a telephone interview.

Bondholder Protection

The Markit CDX North America Investment Grade Index, which investors use to cover losses on corporate debt or to speculate on the solvency, stood at 84.75 basis points in New York, according to Markit Group Ltd. The Markit iTraxx Europe Index 125 companies with investment grade ratings rose 0.5 basis point to 105 basis points at 11:30 pm in London.

The rates tend to fall as improving investor confidence and increases as it deteriorates. The credit-default swaps pay the buyer face value if a borrower defaults on its obligations, less the value of the defaulted debt. A basis point equals $ 1,000 annually on a contract protecting $ 10 million of debt.

Bonds Fairfield, Connecticut-based General Electric Co. were the most actively traded U.S. corporate securities by distributors, with 65 transactions of $ 1 million or more, according to Trace, the bond information system in the prices of the Financial Industry Regulatory Authority.

The Barclays Capital Global Aggregate Bond Index lost 0.41 percent this month, cutting profit this year to 3.75 percent.

The Standard & Poor's / LSTA U.S. leveraged loan 100 Index rose 0.05 cent to 92.64 cents, the highest since Nov. 10. The index tracking the 100 largest dollar loans first lien leveraged. The debt is rated below Baa3 by Moody's Investors Service and lower than BBB-by S & P.

Mortgage Bonds

Ineos Group Holdings Plc, the British chemicals company that moved its headquarters to Switzerland for tax savings received approval from creditors for its reorganization. Ineos will allow the creation of two holding companies in Luxembourg, and two in Switzerland at the top of its operating entities, spokesman Richard Longden said by email.

In emerging markets, the relative yields were unchanged at 242 basis points, according to JPMorgan Chase & Co. index data.

The negotiation of the Denmark bonds - securities backed by cash flows from a group of mortgage loans - rose during the financial crisis, both in total value and the average size of individual operations, according to central bank . It was easier to trade short-term mortgage bonds that the government says, the bank said.

Credit Crunch

The reduction of mortgage debt is at stake, to comply with Basel is "simply out of question, you can not do," said Jesper Berg, senior vice president in charge of regulatory affairs at Nykredit A / S, the country largest mortgage lender. "This would lead to a credit crunch the likes of which this country has ever seen."

Denmark market government bonds is very small by about 300 million kronor ($ 53 million) to close the gap in liquidity of the Basel rules would, Arnth Jensen said.

Danish mortgage bonds returned 4.5 percent this year, according to Danske Bank A / S tracking index values. The debt was down 7.1 percent in 2009 and 6.6 percent in 2008. euro area bond government on average 1.1 percent return this year, 4.4 percent in 2009 and 9.3 percent in 2008.

Denmark's mortgage bonds have not suffered a defect since they were introduced after the fire of Copenhagen in 1795 large.

The Basel Committee, said he had taken into account national circumstances in the design of the rules of liquidity.

The concessions are not enough

"We have come a long way to what counts as the diversification of liquid assets compared to December 2009," said Stefan Walter, secretary general of the Basel Committee. Basel makes concessions in the liquidity rule for banks in countries with low levels of public debt. Plans to "initiate a process to address unintended consequences," said Walter.

Arnth Jensen says that concessions are not enough.

"We are in principle very critical of the idea that the liquidity situation of Danish mortgage bonds should depend on the level of public debt," he said. "Values are liquid, if the State has a high or a low level of debt."

The EU can alter the Basel standards if they threaten the economic recovery of the region, Michel Barnier, financial services by the application of capital adequacy and liquidity standards in the 27-member bloc, told a banking conference 2 December in Brussels.

Denmark mortgage banker association is also warning that the Basel rules can end the country's annual adjustable rate mortgage-bond auctions. so-called Basel obligation stable funding relationship that does not apply until the beginning of 2018, considers that bonds with maturities of less than a year to be volatile.

Auction Abandoned?

"This may well force Denmark to give up their annual auction variable rate" in the short-term securities, Arnth Jensen said.

This year 97 billion U.S. dollars at auction attracted record foreign demand and non-Danish investors bought 20 percent of variable rate bonds on offer, according to Danske Bank. Auctions, which ran from November 25 to December 13, told investors seeking refuge from the debt crisis of Europe.

Nykredit Basel Berg says has to get more lessons of sovereign debt crisis that left two governments in the euro-area dependent on international bailouts, with some investors betting more rescue packages needed to support the single currency region.

"The past year has shown very clearly that public debt is not necessarily always more fluid than other forms of debt," said Berg. "It is simply not the case. The assumption is absurd."