Dutch institutions suffered losses on European government bonds in first half of 2025

At the end of June 2025, Dutch institutions such as banks and pension funds held €531 billion in foreign government bonds, including those issued by national and local governments. This marks a decrease from €536 billion at the end of 2024. The €23 billion drop in value was due to price and exchange rate effects. However, institutions also repurchased €18 billion worth of sovereign debt during the first half of the year, which helped mitigate the decline in total holdings. The largest purchases were made in German government bonds (€11.5 billion), followed by Spanish (€1.7 billion) and Indian (€1.7 billion) government paper.

Decline concentrated in European government bonds, driven by large exposures

The largest declines in value were observed in government bonds from Germany (-€5.4 billion), France (-€2.4 billion), and Austria (-€1.6 billion).

Dutch institutions hold a significant portion of their foreign sovereign debt in euro area countries, with French and German bonds alone accounting for one-third of total holdings. As a result, falling bond values in the euro area have had a relatively strong impact on Dutch portfolios.

In contrast, the most notable increases in value over the past six months were seen in government bonds from non-European countries, led by the United States (+€1.8 billion). Positive price trends were also recorded in Mexico, Brazil, Ecuador, and Thailand, with a combined increase of €853 million. Poland was the first European country to show a value increase, with a gain of €120 million.

The current value of government securities issued in non-euro currencies is partly influenced by international exchange rates. For example, the depreciation of the US dollar against the euro reduced the euro-denominated value of US government bonds held by European investors. Overall, non-European government bonds incurred a €14 billion loss due to currency fluctuations in the first half of 2025.

However, institutions can hedge against such currency risks using derivatives. These instruments typically gain value when foreign currencies depreciate, helping offset losses on the underlying bond holdings. In the case of US bonds, for instance, exchange rate-induced losses can be mitigated by gains on corresponding derivatives positions.

Rising interest rates drive losses for investors in first half of 2025

The decline in the value of foreign government bond holdings during the first half of 2025 was primarily driven by rising interest rates, particularly in countries such as Germany and France. In Germany, a decision earlier this year to partially relax the debt brake has allowed for increased government borrowing. France, meanwhile, continues to face challenges related to its high public debt levels. As interest rates rise, the market value of existing (marketable) government bonds typically falls.

More information:

Table 12.12: Net external assets
Dashboard: External assets