Danish Mortgage Bonds
- a systematic approach to alpha in Europe's most efficient bond market
Jyske Capital’s Danish Mortgage Bonds Strategy is designed for institutional investors seeking long-term outperformance in one of the world’s most liquid and well-regulated bond markets.
We apply a structured investment process that combines in-house quantitative modelling, disciplined risk budgeting, and active market insight. This allows us to consistently harvest relative value opportunities across callable and non-callable bonds, while ensuring strong alignment with client-specific objectives — including ESG issues where relevant.
Strategy highlights
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Multi-factor investment process combining Value, Carry, Momentum and integrated analysis of ESG issues
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In-house model suite including the Bond Pick Model and convexity-adjusted return simulation
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Dynamic segment allocation across callables, floaters, ARMs and government bonds
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Analysis of ESG issues at issuer and bond level, supported by dedicated engagement model
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Clear risk budgeting and performance attribution — embedded in portfolio construction
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Robust liquidity management to ensure flexibility under all market conditions
Investment philosophy
We believe that excess returns in the Danish mortgage market arise from structural inefficiencies — particularly in the pricing of callable bonds. These inefficiencies are driven by market complexity, borrower optionality, and evolving issuance structures.
Our philosophy is built on systematically exploiting these inefficiencies, using daily updated models and continuous validation through fundamental insight. We focus on:
- Value: Option-adjusted spread signals relative to historical and cross-segment peers
- Carry: Convexity-adjusted return modelling across nine rate scenarios
- Momentum: Qualitative input on borrower flows, segment rotation, and investor positioning
- ESG: Integration of ESG issues and climate metrics integrated into the broader investment process, supporting informed risk and opportunity assessment
Environment data in focus for ESG research
For Danish mortgage bonds the environmental performance of the mortgaged properties - the “E” in ESG – is the most important of the three elements in the ESG research. The structure and data landscape of the Danish mortgage bond market favours data related to environmental factors (“E”) over social (“S”) and governance (“G”).
When analysing environmental issues, we combine direct characteristics of the bonds (e.g., bonds issued under a green bonds framework) with indirect indicators such as the share of EPC-A/B housing, CO₂ intensity per DKKm LTV.
When analysing social issues, we use the share of loans given to finance social housing per issuer or per capital centre.
When analysing governance issues, we include evidence from our annual issuer engagement meetings.
Since 2021, we have met with all Danish mortgage bond issuers, collecting unique capital-centre-level data across residential, commercial, agricultural, and shipping loans. These insights support a more complete understanding of issuer and segment fundamentals, identifying potential risks and opportunities that may not be visible in traditional financial analysis.
We can align portfolios with client-specific sustainability preferences, including climate reduction targets. This flexibility enables the strategy to integrate institutional requirements, while maintaining its core focus on disciplined factor-based bond selection.
The Danish Mortgage Bonds team
The Danish Mortgage Bonds strategy is managed by a senior and highly specialised team with decades of combined experience in Denmark’s unique covered bond market. The team combines deep market knowledge, advanced quantitative modelling skills, and proven execution capabilities — all within a fully integrated, collaborative structure.
The team operates without silos — each member contributes to both research and portfolio decisions across all segments. Weekly investment meetings ensure full alignment, with model outputs challenged by market insight before capital is deployed. This approach allows for swift adaptation to market opportunities while maintaining a consistent risk profile.
Get in touch
We are here to help you with professional Asset Management needs. Our clients include pension funds, insurance companies, municipalities and financial institutions.
This presentation does not constitute an offer, invitation, or solicitation to purchase or sell any financial instrument, nor does it constitute personal investment advice. It is provided solely as part of Jyske Bank A/S’ general marketing activities in relation to investment services.