Netherlands Sells Bonds in Speedy Auction Day Before Elections

  • Strong result is a sign of Dutch bonds’ resilience: ABN Amro
  • Auction faster than usual with little sign of political risk

Investors gave the Netherlands a vote of confidence a day ahead of general elections, snapping up government bonds in an auction that only lasted four minutes.

The Hague-based state treasury agency sold a total of 2.275 billion euros ($2.4 billion) of bonds due in January 2022, compared with a target range of 2 to 3 billion euros. The average yield was minus 0.197 percent. The proceeds will help finance borrowing estimated at about 58.7 billion euros for 2017, though that number is likely to change depending on spending agreements between the political parties that will form the new government.

Although polls show a close finish between Dutch Prime Minister Mark Rutte’s Liberals and Geert Wilders’ anti-European Union Freedom Party in Wednesday’s vote, Dutch bonds have mostly ignored political risks unlike French debt, as they benefit from the country’s strong credit and economic profile.

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“The strong auction results show that Dutch bonds remain resilient in the final stage before the elections,” Kim Liu, strategist at ABN Amro Group NV, said in emailed comments after the sale. “Demand was healthy as investors are apparently not worried about increased political risks due to the rise in popularity of the euro-skeptic Freedom party of Mr Wilders.”

It’s a coincidence that the debt sale took place the day before the election, the Dutch State Treasury Agency said in an emailed response to questions on Monday, adding it saw no reason to divert the schedule. The auction was much faster than usual and the agency has now completed 35 percent of its annual mid-target amount, ABN Amro said.

Bond traders will now be looking at the Dutch vote for any impact it might have on France, where anti-euro Marine Le Pen is leading polls for the first round of presidential elections due next month. A better-than expected win for Wilders may raise market concerns about Le Pen, Peter Goves, a London-based strategist at Citigroup Inc., said in a note to clients this week.

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