A sudden reversal of the international hunt for yield could cause prices to plummet, and the trend may be intensified by sales spirals and queues at the exit, which may have a knock-on effect across asset classes. A shortage of liquidity in the market could further accelerate the process.
There are currently no indications that major systemic risks have built up in the Danish financial system. All the same, there is reason to be on guard. Credit institutions should ensure that they are able to withstand both direct losses due to price adjustments for financial assets and the derived effects of the potential market turmoil triggered by such adjustment – e.g.