Marcus Ashworth is a Bloomberg Gadfly columnist covering European markets. He spent three decades in the banking industry, most recently as chief markets strategist at Haitong Securities in London.

The Netherlands has a general election on March 15, the ides of March no less, which Prime Minister Mark Rutte has billed as a chance to stem the tide of nationalism in Europe. The Dutch bond market, meanwhile, seems to be asleep at the wheel. 

Stay Close to Mutti
Dutch bonds pulled oddly closer to Germany as risk-off grips government debt
Source: Bloomberg

The current left/right two-party coalition is set to fracture, and both parties are poised to lose a substantial number of seats. For either of them to retain power will require a compact with at least five parties. About the only thing the 10 or so running in the race with a chance of getting a seat agree on is that they will not form a government with the Freedom Party, led by Geert Wilders, who grabs most of the headlines with his anti-Islam and exit-the-euro stance. They are set for their best ever result and could take the most seats. 

That could lead to chaos and talk that "the next domino has fallen" in a populist wave that started with Brexit and continued with President Donald Trump, said Rutte, whose Liberal Party is only just leading the Freedom Party in polls. 

The Four Year Itch
Yields on German and Dutch government bonds are inseparable at the short end, where the ECB's giving free funding
Source: Bloomberg

Yet no form of political risk is priced into Dutch State Loans. In fact, it's quite the reverse, as yields are hugging ever closer to Germany, benefiting from the growing perception of risk in France. The Dutch spread to Germany has actually tightened about 10 basis points in the past month even as Wilders seems largely to be holding his ground in polls as the election date draws nearer (though his standing has slipped most recently).

If the Freedom Party does achieve the highest number of seats, that's hardly conducive to European harmony even on the strong likelihood that the other parties combine to prevent Wilders from taking power. It would also provide a clear warning sign that support for right-wing nationalist Marine Le Pen might be underestimated in French presidential elections.

Orange Crush
French selloff as Le Pen gained ground sent investors seeking safety to Dutch shores
Source: Bloomberg

Dutch investors seem to be looking at March 15 as a non-event and worrying about Frexit rather than Nexit. Moody's latest credit assessment confirmed a blithe, nothing-to-see-here-approach, citing the robust economic and fiscal fundamentals. Both are ignoring the potential for political disruption.

Diversification is the oft-quoted mantra for owning Dutch bonds, but investors are fooling themselves if they think there really is any transfer of risk. If the European Union were to break up, a measly 15 basis points is an inadequate reward for not owning the superpower of Europe. The Dutch would get left behind in the dust in the scramble to safety.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Marcus Ashworth in London at

To contact the editor responsible for this story:
Jennifer Ryan at