Dutch to Cut Bond Issuance 37% in 2016 After ABN Amro Sale

  • Treasury plans 25 billion-30 billion euros gross issuance
  • Government debt seen declining to 65.4% of GDP vs 66.6% in '15

The Netherlands, which regained the highest credit rating from Standard & Poor’s last month, will reduce government bond sales next year after the government sold a stake in ABN Amro Group NV and as Dutch economic growth supports tax revenue.

Gross issuance will drop to between 25 billion euros ($27.5 billion) and 30 billion euros from 47.4 billion euros in 2015, the Dutch State Treasury Agency in The Hague said Friday in a report. The total estimated funding need, including Treasury bills and other borrowing, will tumble to 78.8 billion euros from 92.1 billion euros this year.

“The improved cash position is partly the result of the solid growth of the Dutch economy,” DSTA Director Niek Nahuis said in the agency’s outlook published Friday. “The funding need for 2016 can decrease even further if the economy beats our expectations or due to possible proceeds from the privatizations.”

The government debt will drop to 65.4 percent of gross domestic product in 2016 from 66.6 percent this year, helped by receiving 3.8 billion euros for the sale of the state’s 23 percent stake in ABN Amro. The budget deficit is forecast to narrow to 1.8 percent from 2.2 percent over the same period.

Governments across the euro area found it easier to narrow budget deficits this year because historically lower yields reduced their borrowing costs. The Dutch agency said it planned to take advantage of this by locking in fixed interest rates for longer terms, extending the average maturity of its debt to 6.4 years by 2019 from five years now.

GDP Forecast

The Dutch economy returned to growth in 2014 after the country was hit by a housing-market slump triggered by the global financial crisis. It is set to grow 2 percent this year and 2.1 percent in 2016, the central planning agency has said.

“The Netherlands is on the rise again,” Sandor Steverink, who helps to oversee about 25 billion euros in government debt at Delta Lloyd Asset Management in Amsterdam, said before the funding report was released. “During the crisis the Netherlands lagged behind, but you clearly see it’s catching up now.”

The yield difference, or spread, between Dutch 10-year bonds and German bunds was about 15 basis points, among the lowest in the euro area. Dutch government debt due in up to five years yields less than zero percent.

The Netherlands plans to sell new five-year and 10-year bonds next year, the debt office said. The agency will also reopen one or more longer dated off-the-run bonds.

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