Abstract:
During the last 10 years, the Danish mortgage-credit market has undergone considerable development. Many additional products have been introduced, but without any changes in the fundamental structure of the Danish mortgage-credit system, including the balance principle. The wider product range is an advantage to borrowers, who now have better opportunities for individual home-financing solutions. Financial consulting has become important to many borrowers.

Intensive product competition in a market with many, complex options for borrowers entails that sales and marketing activities, including efficient sales channels, have become more important. However, price competition has not intensified.

The new loan types and the related new bonds have not reduced the outstanding volume of traditional callable fixed-rate mortgage-credit bonds, since the aggregate mortgage-credit market has expanded as real property has appreciated in value.

In the most recent generation of mortgage-credit bonds, the same volume has not been built up as in the traditional mortgage-credit bonds, be they fixed-rate or adjustable-rate. In addition, the market for the latest bond types is to a lesser extent a uniform market where bonds from the various issuers are seen as perfect substitutes. There is presumably less liquidity in these bonds than in the more traditional Danish mortgage-credit bonds. Both investors and borrowers should take varying characteristics, including liquidity risk, into consideration when using the new products.

Abstract:
This paper explores a long dataset (1999-2005) of intraday prices on German long-term bond futures and examines market responses to major macroeconomic announcements and ECB monetary policy releases. In general, adjustments in prices are quick and new information is usually incorporated into prices within five minutes of announcements. The volatility adjustment is more long-lasting than that in the conditional mean, and excess volatility can be observed up to 30 minutes after the releases. Overall, German bond markets tend to react more strongly to the surprise component in US macro releases compared to euro area and domestic releases, and the strength of those reactions to US releases has increased over the period considered. The paper also provides evidence that the outcome of German unemployment figures has been known to investors ahead of the prescheduled release.

Latest revision: May 2006.