Dutch State Funding Needs to Rise in 2017 Due to Redemptions

  • Government in Netherlands plans to raise 80.7 billion euros
  • Public debt set to fall to 61.8% of output next year

The Dutch government plans to increase the amount of debt it sells next year to take advantage of record-low interest rates even as its budget deficit narrows.

The Netherlands intends to raise about 80.7 billion euros ($90.5 billion) of funding in total in 2017 through bonds, treasury bills and other borrowings, the State Treasury Agency in The Hague said Friday in its quarterly outlook. That’s 15.5 billion euros more than in 2016. With the budget deficit forecast to narrow to 0.7 percent of gross domestic product in 2017 from 1.1 percent this year, the government will use the extra funds to pay down existing debt, the agency said.

The European Central Bank’s quantitative-easing program is depressing yields across the euro area so much that the Dutch government can borrow for practically nothing for up to 10 years. Investors demand just 0.04 percent to hold Dutch 10-year sovereign bonds compared with as much as 1 percent in September 2015. The spread between Dutch 10-year bonds and similarly dated German bunds is the lowest in the currency union.

The funding requirement for 2016 fell to 65.2 billion euros from 74.2 billion euros forecast in June. The government’s finances have been strengthened by faster economic growth while the sale of Propertize, the former real-estate arm of SNS Reaal, raised 900 million euros. The Netherlands plans to reopen the July 2026 bond in October and in November, the agency said.

The government’s debt will drop to 61.8 percent of GDP in 2017 from 63.3 percent this year, state planning agency CPB said Tuesday when Prime Minister Mark Rutte’s coalition of Liberals and Labor presented its 2017 budget plan.

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