Netherlands Funding Needs to Drop by 4 Billion Euros

Netherlands Funding Needs to Drop by 4 Billion Euros

The Netherlands will borrow about 4 billion Euro less next year than in 2013 according to a statement by Dutch State Treasury Agency, known as the DSTA.

Today the DSTA presented its Outlook 2014. The Outlook specifies the funding need for 2014 and explains how the DSTA intends to meet its borrowing requirement. The Outlook also looks back on the execution of the funding plan for 2013 and presents the selection of Primary Dealers and Single Market Specialists for the next calendar year. Furthermore, the Outlook elaborates on the economic and budgetary outlook for the Netherlands.

Based on most recent estimates for the cash deficit in the budget for the running year, the size of the money market is expected to amount to € 47.6 billion at the end of 2013. This amount must be refinanced next year. A net cash deficit of € 13.9 billion is expected for 2014 (his is the total of a projected gross cash deficit of € 15.9 bln and inflows from local governments of approx. € 2 bln). With capital market redemptions in 2014 of € 32.2 billion, thetotal borrowing requirement in 2014 is expected to amount to approximately € 93.7 billion.

Of this amount, the DSTA will fund approximately € 50 billion in the capital market in 2014, just as it did in 2013. The remaining borrowing requirement will be covered on the money market, mainly through the issuance of Dutch Treasury Certificates (DTCs) and Commercial Paper.

The total funding need in 2014 is foreseen to be about € 4 billion lower than in 2013. With a constant capital market issuance volume of € 50 billion, this implies that under the current projections the outstanding volume of the money market will slightly decline. As was the case in previous years, the money market will be used to cover budgetary setbacks or windfalls in 2014. This will allow capital market issuance to remain at its target level of approx. € 50 bln.

In 2014 the DSTA will issue four new Dutch State Loans (DSLs). Aside from the launch of a new 3-year, 5-year and 10-year DSL, the DSTA will also issue a new 30-year DSL. This is in line with its commitment to issue a new 30-year bond once every four or five years. The 5-year, 10-year and 30-year DSLs will be launched by means of a Dutch Direct Auction (DDA). The window for the launch of the 10-year and 30-year DSLs is February-April. The DDA for the 5-year DSL will take place in September/October. Before the launch of the new 5-year DSL, the DSTA will reopen the current on-the-run 5-year DSL in the first half of 2014 so that it reaches its benchmark size of at least € 15 billion.

Furthermore, the DSTA will continue its off-the-run facility in 2014. Off-the-run bonds will be reopened during two auctions: on the fourth Tuesday in January and the fourth Tuesday in June. The selection of the specific DSLs to be reopened during these auctions will be announced on the Wednesday preceding the auction.

The possibility of issuing a US dollar denominated bond remains a possibility for the DSTA if a funding advantage can be obtained, and given a sufficient funding need.

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