Larger proportion of foreign currency debt instruments
The third quarter of 2015 saw gross issuance of debt paper decrease by EUR 36 billion to EUR 130 billion. The fractionally higher money market issuance volume was counterbalanced by substantially lower capital market issuance. At the same time, however, Dutch institutions redeemed considerably fewer debt instruments. All in all, the total nominal value of the outstanding debt paper remained broadly stable at around EUR 1,878 billion. An ever growing proportion of debt paper is denominated in foreign currency.
Slight increase in money market issues
Gross issuance of money market paper by Dutch institutions came to just under EUR 71 billion in the third quarter. Of the total amount raised, EUR 26 billion flowed to the central government, EUR 22 billion to banks, EUR 18 billion to special financial institutions (SFIs) and the remaining portion to other institutions. Money market issues were up from the previous quarter but remained well below levels that were normal in the first years of the financial crisis (Chart 1), when the average quarterly issuance volume exceeded EUR 120 billion.
The total nominal value of money market paper rose from EUR 120 billion to well over EUR 124 billion in the third quarter. This was mostly driven by an increase of EUR 9 billion in the government’s outstanding money market paper. The government generally relies on the money market relatively heavily in the third quarter. The increased issuance of money market paper is contrary to the trend observed in recent years of institutions relying less on short-term financing.
Sharp drop in capital market issues
In the third quarter, Dutch institutions issued capital market paper worth approximately EUR 60 billion. The main issuers were banks (EUR 22 billion), SFIs (EUR 14 billion), other financial intermediaries (EUR 9 billion) and the central government (EUR 8 billion). A mere handful of large non-financial corporations resorted to the capital market, borrowing only EUR 1 billion. The capital market issuance volume weakened considerably from the preceding quarter, a seasonal effect also observed in previous years (Chart 2).
Despite the sharp drop in gross issues, net issuance was still just positive, with institutions having to make fewer redemption payments. The decrease in the total nominal value of capital market paper by EUR 4 billion to EUR 1,754 billion that nevertheless occurred was caused by a drop in value of foreign currency capital market paper. Although in the third quarter the exchange rate of the euro vis-à-vis the US dollar remained virtually unchanged from the second quarter, most other currencies depreciated against the euro.
Increase in outstanding foreign currency debt securities
An ever growing proportion of the outstanding debt paper is denominated in foreign currency (Chart 3), a trend that is evident particularly in money market paper. The share of foreign currency in the total volume of outstanding Dutch money market paper rose to 57% in the third quarter, the highest level in recent decades. The trend-based increase is attributable in full to banks. Other Dutch parties hardly issue foreign currency money market paper, with the exception of the central government, which is active in this segment only occasionally.
The share of foreign currency in capital market paper also rose, albeit less rapidly and at a lower level. In recent quarters, 28% was denominated in foreign currency, up from less than 20% five years ago. In this market segment not only banks are major issuers, but SFIs are also very active. The majority of these issues concern dollar bonds, with a much smaller portion of bonds issued in Swiss francs, Japanese yens and British pounds.