Netherlands Emulates Germany Setting Zero Coupon on 3-Year Note

The Netherlands set the coupon on three-year notes to be sold next week at zero, meaning it won’t pay interest on the debt, as top-rated euro-area nations lock in borrowing costs that reached record lows last year.

One of four countries in the region with a AAA grade from Fitch Ratings, Moody’s Investors Service and Standard & Poor’s, the Netherlands will sell as as much as 3.5 billion euros ($4.6 billion) of the April 2016 securities. Germany sold two-year debt with a zero coupon in May as investors sought a haven from Europe’s sovereign debt crisis. The last time the Dutch government sold three-year notes, on Nov. 27, they had a 0.75 percent coupon.

“It’s a reflection of where Dutch bonds have been trading over recent months,” said Padhraic Garvey, head of developed markets debt strategy at ING Groep NV in Amsterdam. “There’s been a flight into safe assets including Germany, and the Netherlands. Yields are very close to zero, so why not?”

The notes will be sold on Jan. 8, the Dutch State Treasury Agency said in a statement today.

Dutch government debt securities due between one and three years made investors 19 percent in the five years through Dec. 31, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Three-year yields fell to a euro-era low of 0.013 percent on Aug. 2 and were at 0.13 percent at 4:26 p.m. London time today.

To contact the reporter on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net