Insurers show increased demand for corporate bonds

Statistical News Release
Date 12 September 2013

In the second quarter of 2013, Dutch insurers purchased € 2.8 billion worth of bonds, figures of De Nederlandsche Bank show. Underlying this figure was a shift away from government bonds and towards corporate bonds. On balance, however, price losses resulted in a decrease of the bond portfolio by € 2 billion to € 191 billion.

Insurers’ bond transactions

In the second quarter of 2013, Dutch insurers bought almost € 3 billion worth of securities, the bulk of which consisted of bonds (€ 2.8 billion), well above the €2 billion average recorded in preceding quarters. At the same time, demand shifted towards corporate bonds. There was a general increase in demand for this type of debt securities, whose higher yield opportunities attract investors. During the second quarter of 2013, insurers purchased € 2.4 billion of corporate bonds, compared to nil, on average, during the preceding quarters.  The size of this portfolio was thus taken to € 69 billion at end-June 2013. The purchases regarded bank bonds and long-term paper issued mainly by Special Financial Institutions and SPVs, and bonds issued by non-financial corporations. In geographical terms, almost half the bond purchases concerned US paper.

A contrary development was observed as regards government paper. While purchases of long-term government paper in previous quarters ran to  € 2 billion, on average, net purchases dropped during the second quarter, to € 0.4 billion. Meanwhile, insurers continued to buy considerable quantities of German Bunds, while also buying Belgian paper. Contrasting this, however, were sales of, especially, Dutch long-term paper and of Finnish and French government bonds. As a result, the weight of Germany in this portfolio rose to 34%, whereas those of the Netherlands and France fell to 32% and 11%, respectively, as at June 2013. These figures include price losses during the second quarter totalling € 4 billion, reflecting rising long-term interest rates. Thus a rise in German long-term rates – with the 10-year benchmark going up 40 basis points to 1.76% – resulted in a depreciation by € 1.8 billion.