Interest Rates at 27-Year Low

11-08-2010 13:33 The interest rate on a ten-year Danish state bond is now at its lowest level since 1983 at 2.574 percent, reports borsen.dk. The Danish national bank followed suite after the German Bundesbank reduced its own rate by five basis points. German ten-year bonds are now at their lowest rate ever.

“At the moment we are experiencing an unusual situation” Rasmus Gudum-Sessingo, a Senior Economist at Handelsbanken, told borsen.dk. Interest rates are so low that they can be directly linked to the fact that we are experiencing a crisis of historical significance. It shows that the crisis is not yet behind us”

“The low interest rates are a delayed effect of the economic crisis, which dampened price development to a significant extent” he continued. “They demonstrate that the global economy has experienced its largest step backwards since the Second World War”

According to Gudum-Sessingo, the drop in Danish and German interest rates is to a large extent the result of to yesterday’s decision by the US Federal Reserve to keep its own rate at a record low of close to 0 percent, and the fact that deflation is becoming a real worry in the eurozone.