Dutch debt paper reaches record level despite low issuance
In 2014, the outstanding amount of Dutch debt paper (money market paper and bonds) increased by 6%, reaching a record EUR 1,826 billion, in spite of a sustained low level of new issuances. In the fourth quarter of 2014, total issues of money market paper and bonds slipped further, to a total of EUR 103 billion, as against EUR 122 billion in the previous quarter (down 18% q-on-q). These quarterly issue volumes are the lowest since the first quarter of 2003.
Debt issuance low in capital market
Dutch institutions again issued a limited volume of bonds in the fourth quarter of 2014 (Figure 1), in part because they had relatively little need to refinance redemptions. In terms of volume, they issued EUR 46 billion’s worth in bonds, similar to the previous quarter. Because few securities were redeemed during this period, the total volume of outstanding bonds grew to an all-time high of EUR 1,702 billion, even when allowing for a methodological break seen with respect to bank bonds (versus EUR 1,673 without the break).
Chart 1: Amount outstanding and gross issuance Dutch capital market
The final two quarters of 2014 saw a limited volume of bank bond issues. While banks issued more bonds in the fourth quarter of 2014 (EUR 13.3 billion compared with EUR 10.5 billion in the third quarter), these quarterly figures are the lowest in the past six years. The volume of outstanding bank bonds nevertheless grew q-on-q from EUR 418 billion to EUR 426 billion at year-end 2014, in part owing to a methodological break and relatively low redemptions. The issue of new securitisations by Special Purpose Vehicles (SPVs) likewise increased from EUR 2.5 billion to EUR 3.8 billion, which is still low seen from a historical perspective, the five-year quarterly average being EUR 15 billion. The Dutch State’s net bond issuances were EUR 4.9 billion, bringing total outstanding government bonds to EUR 334 billion at year-end 2014. Special Financial Institutions (SFIs) issued EUR 20.5 billion in bonds (up 6% q-o-q), bringing their proportion of total outstanding Dutch bonds to more than 25%.
Highly subdued money market issuance
In the fourth quarter of 2014, gross issuance of money market paper came to EUR 57 billion, reaching the lowest volume in over ten years (Figure 2). At EUR 75 billion on average, the issuance of short-term money market paper lagged far behind over the past five quarters, the five-year average standing at EUR 110 billion. Total outstanding money market paper dropped to EUR 124 billion due to redemptions. This is a six-year low, with the exception of the final quarter of 2013, when banks and the Dutch State issued small amounts while facing large redemptions.
Chart 2: Amount outstanding and gross issuance Dutch money market
Banks raised EUR 25.7 billion, as against EUR 18.9 billion in the previous quarter, while redemptions ran to EUR 28.2 billion, causing total outstanding money market paper issued by banks to slide further and land at EUR 73 billion. The Dutch State’s net issuances were EUR 9.1 billion's worth in money market paper (as against EUR 33.9 billion in the third quarter) and it redeemed EUR 18.7 billion. This brought the balance of outstanding short-term government paper to EUR 22 billion, the lowest level seen in more than seven years. Special Financial Institutions issued debt paper worth EUR 15.8 billion, compared with EUR 20.1 billion in the third quarter. Redeeming EUR 18.4 billion, they had EUR 23 billion in money market paper outstanding.