Danish bonds paid 2.5 to 10.5 points more than deposits

How much more did a Danish bond pay than a bank deposit? Each row is one quarter from 1974 to 1987, with the bond yield and the bank deposit rate. The gap never closed: bonds paid more in every one of the 55 quarters, by 6.59 points on average, and the widest gaps came before 1981.

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Bonds peaked at 21%; deposits at 12%

Both rates climbed through the 1970s and fell after 1982, but the bond line stays well above the deposit line throughout. The bond rate peaked at 21.08% in the second quarter of 1982. The deposit rate peaked at 12.10% in the second quarter of 1980. Over the whole span the mean bond rate was 15.64% and the mean deposit rate was 9.04%.

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The gap peaked at 10.5 points in 1978

Subtract one line from the other and the gap becomes one distance from zero. The spread peaked at 10.50 points in the last quarter of 1978 and fell to 2.53 points in the first quarter of 1986. It never touched zero.

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After 1981 the typical gap narrowed 2.5 points

Split the quarters at 1981 and compare the boxes. The median spread from 1974 to 1980 was 7.51 points; from 1981 to 1987 it was 4.96 points. The later box also reaches lower: every spread under four points comes from 1985 on.

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Deposits followed bonds, but not point for point

Each quarter placed by its two rates. The deposit rate rose and fell with the bond rate (correlation 0.803), but the cloud is flatter than the diagonal: a quarter with bonds near 20% had deposits near 11%, not 20%.

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Takeaway

A Danish saver who held bonds instead of deposits earned 6.6 points a year more on average, and over 10 points more at the 1978 peak. The gap narrowed after 1981 as both rates fell, but it never closed.

Limits

Fifty-five quarters from one country, with the bond yield and deposit rate as the source recorded them. A yield gap is not a return: bonds carry price risk that deposits do not, and nothing here says which was the better investment.