Outlook 2009

Dutch State Treasury Agency

Outlook 2009

Preface

2008 was a turbulent and challenging year for all of us. Already lingering for some
time, the crisis on the financial markets deepened markedly since September. To
defend financial stability, the Dutch government reacted promptly by taking unique,
but decisive measures. These have raised our immediate funding need in 2008 by
an unprecedented amount of H 80 bln. To obtain the extra money, the dsta has
employed its instruments in a flexible way. Most notably, we stepped up our
commercial paper programme and added dtc programmes and auctions. Next year,
this short-term funding needs to be rolled-over. As a result, for 2009 we set our call
on the capital market at H 48 bln. For the remainder, we will continue to rely on the
money market, which will stay large during the year. In 2009, the dsta is planning to
launch three new benchmark bonds, a 3-year via tap and a 5-year and 10-year bond
both via the Dutch Direct Auction. For first time since 2005 two ddas will be
organised.
Despite the gloomy economic outlook, the fundamentals of the Dutch economy
remain strong. The substantial investments in the financial sector have resulted in
a temporary but significant increase in gross state debt. Nevertheless, the level of
government debt in the Netherlands is still well-below the Euro Area average and
below the 60% threshold of the Maastricht Treaty. On a net basis, government wealth
has not changed as a result of the investments. The Netherlands remains one of
the most credit-worthy countries in the Euro Area and worldwide, as reflected in its
aaa-rating.
Also in a different context 2009 will be a challenging year for the dsta. After 167
years, the dsta is about to leave Amsterdam and will move to The Hague. This
Outlook marks the dsta’s farewell to Amsterdam, as reflected in the pictures of the
buildings in which the dsta has had its office since 1841. The Outlook also contains
photos of the newly renovated building of the Ministry of Finance where we will be
located. The building combines the concrete of the old building and the glass of the
new. This combination of solidity and transparency fits the dsta very well. With the
move, the opportunity was seized to merge with the Cash Management Division of
the Ministry. As a result, the new dsta will combine all internal and external treasury
responsibilities of the central government. From 19 January 2009 you can find us at
the Korte Voorhout in The Hague.
Erik Wilders

Agent of the Dutch State Treasury Agency

Contents

1

The economy, the budget and the financial markets
1.1 The economic and budgetary outlook
1.2 The dsta and the financial turmoil

7
8
12

2

Funding and issuance
2.1 Looking back
2.2 Funding plan for 2009

17
18
26

3

Primary and secondary markets
3.1 pds and smss: ranking 2008 and selection 2009
3.2 First experiences with multiplatform quotation

33
34
35

4

The DSTA: Move and Merger
4.1 Reorganisation of the dsta
4.2 Organisational structure

39
40
44

Statistical information
1 Interest costs of central government debt
2 Changes in long-term debt in 2008
3 Issuance of bonds for the 2007 and 2008 borrowing requirement
4 Concluded interest rate swaps
5 Results of the money market benchmark
6 Key figures of individual bonds in 2008
7 Annual interest payments and repayments of principal, 2008-2037

47
48
49
50
51
52
53
55

Highlights of the DSTA Outlook 2009

59



The economic outlook is highly uncertain. World-wide,
growth projections have been scaled down continuously.
Growth in the Netherlands is expected to remain above
the Euro Area average. Strong fundamentals provide a
welcome starting position to face the current economic
headwinds. After multiple years of surpluses, the budget
balance is set to decline in 2009. On financial markets,
Dutch bonds and bills have provided a safe haven for
investors, with swap spreads widening.

The economy, the budget and the financial markets

The economy, the budget and
the financial markets

1.1 The economic and budgetary outlook
Early in the financial crisis, spill-over effects to the real economy seemed relatively
limited. Since mid September, the situation on the financial markets has deteriorated
markedly. It is now generally acknowledged that the financial crisis will have
substantial effects on the real economy. However, the uncertainty is high regarding
the size of the impact. For now, it is unclear how the crisis will develop and how
markets (and economic participants) will respond to measures taken by governments
to promote financial stability. As a result, it is particularly difficult to make
projections into the future of for instance growth, inflation and unemployment.

The economy, the budget and the financial markets



The economic situation
Following a buoyant economic performance in 2007, gdp growth slowed in the
course of 2008, with the first quarter posting a quarter-on-quarter growth rate of
0.3%, followed by 0.0% in the second and third quarter. At -0.2%, the Euro Area saw
two consecutive quarters of negative growth in the second and third quarter.
In time, projections for economic growth have been reduced, especially in the last few
months. Last April and September, the cpb forecasted an economic growth of 11⁄¢%
for the Netherlands in 2009. This latest official cpb growth projection dates from
mid September, shortly before the situation on financial markets deteriorated
strongly. The general consensus is that the official cpb forecast is outdated. In
October, the imf scaled down it projections for world wide growth; for the
Netherlands a rate of 1% was projected for 2009. On 3 November, the European
Commission (ec) came out lower still, with a growth estimate for 2009 of 0.1% for the
Euro Area and 0.4% for the Netherlands. That same week, the imf scaled down its
projections further, to -0.5% gdp for the Euro Area (no update available for the
Netherlands).
Table 1.1 shows that despite the substantial slowdown in growth, the Netherlands is
doing better than the big 3 Euro Area countries. On 9 December, the cpb will have
published its new projections for 2009 (after the cut-off date of 14 November for this
Outlook). It can no longer be excluded that the economy will stagnate in 2009, with
growth either above or somewhat below zero. The dsta will report on the updated
economic projections for the Netherlands in its Quarterly Outlook in January 2009.
Table 1.1

Annual GDP growth in Europe, selected countries
2008

2009

France

0.9

0.0

Germany

1.7

0.0

Italy

0.0

0.0

Netherlands

2.3

0.4

Spain

1.3

-0.2

Euro Area

1.2

0.1

UK

0.9

-1.0

EU 27

1.4

0.2

Source: European Commission, Economic Forecast, Autumn 2008

Based on the ec’s forecasts, world trade is set to decline significantly resulting in a
slow-down of Dutch exports to 1.3% in 2009. Consumption growth– the largest
component of gdp – is set to slow down to 0.6% in 2009 (table 1.2). Negative for
consumption are wealth losses following the decline in equity markets, uncertainty
regarding the housing market and the less than full indexation by pension funds due
to lower cover ratios, reducing purchasing power of pensioners (see Box 1). Consumer

confidence indicators have fallen sharply, reflecting increased worries of consumers
about their personal financial situation. Positive for consumption are the low
unemployment rate, wage growth and the decline in inflation, all supporting the
purchasing power of households. In light of the economic downturn, the government
decided to abstain from the proposed increase in vat of 1%-point to curb inflation, to
support purchasing power and to moderate wage demands.
Table 1.2

Key economic indicators for the Netherlands and Euro Area

		

Netherlands		

		

2008

2009

Euro Area
2008

gdp growth (%)

2.3

0.4

1.2

0.1

Growth domestic demand (%)

3.0

0.1

1.0

0.0

2009

Private consumption (% growth)

2.0

0.6

0.5

0.4

Total investment (% growth)

7.1

-2.7

1.2

-2.6

3.0

3.4

7.6

8.4

1.8

0.3

0.9

-0.4

Inflation (%)

2.5

3.0

3.5

2.2

Current account balance (% gdp)

7.1

7.1

-0.4

-0.1

Source: European Commission, Economic Forecast, Autumn 2008

For 2009, the ec expects an unemployment rate for the Netherlands that lies 5%points below the Euro Area average, at 3.4% in 2009; this is somewhat higher than
the 3.0% for 2008, providing relief to a tight labour market. Triggered by lower prices
for oil, the inflation rate in October was 2.5% in the Netherlands, with a comparable
harmonised rate in the Euro Area of 3.2%. In light of the recent price developments,
the ec estimate for Dutch inflation in 2009 of 3% seems rather high. Overall, the
Misery Index in the Netherlands – the sum of unemployment and inflation – is
among the lowest in Europe.

Box 1 – The pension sector and the financial crisis
The Dutch pension system is internationally well known. The Netherlands ranks 2nd
after Switzerland of the 11 countries with the largest pension savings measured by gdp
(see the dsta’s Quarterly Outlook 4, September 2008).
The last few months, pension funds have experienced a substantial decrease in their
cover ratios (measuring the ratio between nominal assets and liabilities). abp, the third
largest pension fund in the world covering government employees and teachers,
published a coverage ratio of 118% at the end of September, compared to 132% in June
2008. The cover ratio of pggm – the second largest in the Netherlands, covering the
health sector – decreased from 143% in the second quarter of 2008 to 126% and the end
of the third quarter. If the cover ratio falls below 130%, pension funds are required to file
a long-term recovery plan indicating how to restore the ratio of 130% within the next 15
years. When a pension fund would face a cover ratio below the minimum required level
of 105%, it should file a short-term recovery plan with the central bank outlining how the
cover ratio will be improved to a level above 105% within 3 years.
Notwithstanding the current setbacks, in October the supervisor (dnb) emphasized that
the Dutch pension system is robust and that the pension act offers adequate flexibility
to do justice to the long-term nature of pension liabilities. dnb states that especially in
bad times, the inherent flexibility of the system should be used. There is no need for
pension funds to immediately adjust their investment policies in response to the crisis.
The buffers that pension funds have built in the past, should be relied upon now.

The economy, the budget and the financial markets

Unemployment (% labour force)
Employment growth (%)



When the situation on financial markets improves and cover ratios are rebuilt, indexation
missed during this crisis could be still be granted (back-log indexation). This is also what
was done following the financial market downturn earlier this decade. Different from the
earlier period is that at that time pension contributions had been kept too low for too
long. Contributions were corrected after 2002 and this has increased the current
resilience of the Dutch pension sector.

Strong economic fundamentals
Notwithstanding the challenging economic circumstances we are now facing, the
fundamentals of the Dutch economy are relatively strong, also as a result of the strong
economic performance of the last couple of years and the economic reforms that have
been undertaken.

The economy, the budget and the financial markets

10

The two tables below illustrate the underlying strengths of the Dutch economy. In
both rankings, the Netherlands is in the top 10 of countries world wide, and one of
the highest ranking countries in Europe. The table on the left represents the rankings
according to the Global Competitiveness Index (gci) of the World Economic Forum
(wef). The Dutch economy is at position 8, making it the number 3 in the Euro Area,
after Finland and Germany. According to the wef, the Netherlands is performing
relatively well on several indicators. Compared to neighbouring countries, its
performance is strong on macro economic stability, product market efficiency, health
care, and primary and higher education. The Dutch economy ranks number 1 (of 134
countries under review) with regard to the technological readiness of the country.
Table 1.3

Global Competitive Index

Table 1.4      Credit Rating Ranking

Country

Score

1

United States

5.74

1

Switzerland

96

2

Switzerland

5.61

2

Luxembourg

95.4

3

Denmark

5.58

3

Norway

95.2

4

Sweden

5.53

4

Germany

95

5

Singapore

5.53

5

Netherlands

94.7

6

Finland

5.50

6

Canada

94.7

7

Germany

5.46

7

Finland

94.6

8

Netherlands

5.41

8

Sweden

94.1

9

Japan

5.38

9

Denmark

94

10

Canada

5.37

10

Austria

93.7

Source: World Economic Forum, Global Competitiveness Index 2008-2009

Country

Credit rating

Source: Institutional Investor, September 2008

In the credit rating ranking of the Institutional Investor of September, the
Netherlands obtains the fifth position (of 177 countries) in the ranking of countries
with highest credit quality. The Netherlands is the third country in the Euro Area,
directly after Germany, the benchmark in the Euro Area.
The budgetary outlook
In the Budget Memorandum published last September, budget surpluses – both
actual and structural – were projected for every year up to and including 2011. Since
the impact of the financial crisis appears much stronger than was anticipated last
September, the budget balance is set to deteriorate. Early November, the European
Commission predicted a surplus of 0.5% for 2009 and a 0.1% surplus for 2010.

Figure 1.1

EMU-balance (net lending +, net borrowing -) (% gdp)

Figure 1.2

Gross EMU-debt 2009, general government (% gdp)

Ireland
uk

100

France
Greece

80

Italy
60

Portugal
Spain

40

Euro area
Austria

20

Belgium
Germany

2008

-6

-4

-2

0

2009

2

4

Italy

Greece

France

Belgium

Portugal

Euro Area

Austria

Germany

uk

Spain

Netherlands

-8

Ireland

Finland

Finland

Luxembourg

Luxembourg

0

Netherlands

Source: European Commission, Economic Forecast, Autumn 2008

Mirroring the economic fundamentals, the starting position of the budget is
favourable, with the latest official estimate of a budget surplus of 1.2% gdp for 2008
(Budget Memorandum 2009). Before the Outlook went to press, no updated official
budget estimate was available. The budgetary rules in the Netherlands are designed
for both good times and bad times, implying that a deterioration of the budget does
not instantly trigger counter measures (see below).

The current budgetary policy rules have proven to be very successful and therefore
internationally highly regarded (by imf, oecd, and European Commission). The
budgetary rules are based on a strict separation between revenues and expenditures
and on the principle that the automatic stabilizers are allowed to work freely. This means
that planned expenditures will be continued when being faced with an economic
downturn, unless the pre-determined expenditures ceilings are being breached.
Likewise in the situation of an economic upturn, expenditures cannot be increased.
Windfalls on the revenue side are credited to the emu-balance and setbacks on the
revenue side are debited to the emu-balance. Only in the event of setbacks that cause a
breach of the early warning level of a 2% emu-deficit, measures should be taken. But
normally, there is no need for the government to react to the latest developments in the
budget.

In a European perspective, the budgetary position in the Netherlands is favourable.
The Autumn Forecast of the European Commission, published on 3 November,
projects a emu-deficit for the entire Euro Area of 1.8% gdp in 2009, contrasting
sharply with the 0.5% gdp surplus for the Netherlands (see figure 1.1). The structural
(or cyclically adjusted emu-balance) shows a similar pattern: -1.4% gdp for the Euro
Area, and +0.5% gdp for the Netherlands in 2009.
Also the level of (gross) emu-debt is far below the average of the Euro Area as a whole.
Among them, the 15 countries participating in the emu will have a debt quote of
67.2% gdp in 2009; whereas the corresponding number in the Netherlands is 20%points lower, at 47%, according to ec projections (see figure 1.2). The 47% includes the
effect of capital investments done in the financial sector (described in section 2.1 of
this Outlook). At 47%, the Netherlands is far below the 60% threshold of the
Maastricht Treaty.

11
The economy, the budget and the financial markets

Source: European Commission, Economic Forecast,
Autumn 2008

1.2 The DSTA and the financial turmoil
After the outbreak of the liquidity crisis in 2007, both financial institutions and debt
management offices were faced with new challenges in 2008. Amidst a volatile
environment in which financial institutions were confronted with more stringent
balance sheets and financial stability was threatened, the dsta had to substantially
increase its funding (explained in section 2.1). This section reflects on the performance
of Dutch T-bills and T-bonds.

The economy, the budget and the financial markets

12

Effects of the turmoil on the front end of the Dutch curve
Generally speaking, dtcs have functioned as a safe haven for investors from the
beginning of the crisis. At the same time, cash inflows into short term paper have been
less reliable and more volatile than in more normal times. The performance of dtcs
versus eonia – the dsta’s benchmark for money market transactions – has shown a
pattern not unlike a rollercoaster. Caused by balance sheet pressures and increased
funding costs of banks, dtc rates gradually increased towards eonia in the first half of
the year. At half year end, dtcs performed slightly above eonia, for the first time since
1999. This unprecedented underperformance of dtcs was accompanied by similar or
even more pessimistic results of other issuers of short term government paper in the
Euro Area.
As the risk adverse sentiment among investors increased in the third quarter of 2008,
the flight to safety showed itself by a strong demand for dtcs (see figure 1.3). As
confidence among market participants diminished and inter-bank lending almost
completely dried up, the excessive liquidity was largely invested in risk free
government paper. Especially the demand for short term dtcs grew strongly in the
third quarter of 2008. Testimony to the at times severe tightness in the dtc market
is the relatively more frequent use of the dtc repo facility available to the dsta’s
Primary Dealers and Single Market Specialist (section 3.1). To illustrate, in the first
4 weeks of September, the average daily dtc repo transaction amounted to H 190 mln.
This size increased sharply to an average daily of H 760 mln in the three week period
starting 29 September. In the last week of October and the first week of November, the
average volume decreased again, to H 350 mln per day. Around 90% of all dtc repo
transactions were overnight. As will be explained in section 2.1, the dsta stepped up
its call on the dtc programme in the fourth quarter of 2008. More recently, yields of
short term paper with maturities from 3 to 6 months again moved to levels exceeding
eonia rates. The yields of dtcs maturing within 3 months remained below eonia (up
to early November).
In the commercial paper (cp) programme the dsta saw interest of various investors
to deposit their cash positions at relatively low yields throughout the year. As a
consequence, the cp programme has accounted for a relatively large proportion of the
short-term funding need and has become an important funding source for the dsta.
Unlike dtcs and dsls, cp is largely demand-driven and tailors more to the need of
investors (daily issuance and broken dates). Via the cp programme the dsta attracts a
broader range of investors, for instance those with temporary excessive cash surpluses
in us dollars. As the dsta swaps the foreign notional amounts back into euros,
currency risks are fully hedged.
Mainly real money investors shifted their focus from the search for higher yields to
a search for safety. Spreads between the uncollateralized depo rate vs. eonia clearly
illustrate credit fears along the maturity spectrum (figure 1.4). Liquidity itself was not
an issue as the ecb provided abundant liquidity to the market throughout the year
for a wide variety of maturities. The reluctance to lend among market participants

Figure 1.3

DTC performance vis-à-vis eonia (up to 31 Oct)

BP

Figure 1.4 Credit risk: Eonia vis-à-vis depo rates (up to 31 Oct)
BP

0
200
-20
150

-40
-60

100

-80
50
-100
0

2 Jan 08

2 Mar 08

dtc 3m - Eonia 3m

2 May 08

2 Jul 08

2 Sep 08

2 Jan 08
Depo-eonia 1m

dtc 6m - Eonia 6m

Source: Own calculations, based on Bloomberg data

2 Mar 08

2 May 08

Depo-eonia 3m

2 Jul 08

2 Sep 08

Depo-eonia 6m

Strong demand for DSLs despite widening vis-à-vis Germany
The flight of investors into safety was mainly directed but not confined to short
term paper. dsls attracted similar strong, albeit volatile, demand from investors
throughout the year. To illustrate, the cost of borrowing for a 10-year maturity fell
below 4% mid February and peaked in June around 4.8%, followed by a decrease to
around 4.3% in the third quarter of 2008. The demand for Dutch bonds resulted in
widening of spreads measured vis-à-vis asw (see figure 1.5)1. The demand for Dutch
paper was so high that the continuous availability of bid and offer prices was
jeopardized (see section 3.2). For this reason, the dsta decided in September to extend
the current repo facility to the vast majority of dsls. Under the extended facility,
Primary Dealers are entitled to obtain dsls in exchange for other dsls at a rate of at
least 25 basis points above the rate in a general collateral transaction. Later, the dsta
also accepted cash in exchange for dsls. Since its introduction, the extended dsl repo
facility was used for a total amount of H 6 bln. In the year 2008 up to mid September,
the total amount was a minor H 330 mln. The dsls most frequently repo-ed were the
January 2037, the July 2009 and the July 2013.
When compared to the German curve, Dutch bonds came under pressure and
underperformed throughout the year (see figure 1.6). The negative yield spread
widened in the second half of the year as the German curve benefited from its unique
benchmark position in the Euro Area. Since there have been no structural changes
in terms of credit risk, the lower cost of borrowing for Germany can entirely be
explained by liquidity. Especially the use of interest rate futures (Schatz, Bobl and
Bund) for hedging purposes is important here. Because these future contracts specify
that a range of German bonds can be delivered (‘cheapest-to-deliver’) at the expiration
date, the tradability of the German bonds is amplified. Although the Dutch curve
came under pressure vis-à-vis Germany, the underperformance was relatively limited
when compared with the performance of some other countries. Governments without
an aaa-credit rating were hit hardest, particular the bonds with longer maturities.
The asset-swap spread is used to measure the difference in yield between – in this case – a dsl and the corresponding
swap rate. The basis point spread vis-à-vis the interest-rate swap curve is a measure of credit and liquidity risk.

The economy, the budget and the financial markets

contributed greatly to the widening of money market inter-bank credit spreads. As
a result, financial institutions continued to hoard cash on their balances or stashed
liquidity on deposit with the ecb to preserve immediate access to liquidity and
minimize credit risks. To address this situation, multiple governments (including
the Netherlands) have developed guarantee schemes to kick start bank lending (see
section 2.1).

1

13

Source: Own calculations, based on Bloomberg data

Figure 1.5 Performance of 2 and 10 year DSLs (vis-à-vis asw)

Figure 1.6 Performance of 2 and 10 year DSLs (vis-à-vis Germany)

0
50

-20

40

-40

30
-60
20
-80

10

-100

0
-10

Oct 05 Feb 06 Jun 06 Oct 06 Feb 07 Jun 07 Oct 07 Feb 08

The economy, the budget and the financial markets

14

nl 2 yr asw-spread

nl 10 yr asw-spread

Oct 08

Oct 05 Feb 06 Jun 06 Oct 06 Feb 07 Jun 07 Oct 07 Feb 08
nl 2 yr spread to ger

Source: Generic spreads generated by Credit Suisse Locus

Oct 08

nl 10 yr spread to ger

Source: Generic spreads generated by Credit Suisse Locus

Box 2 – Minimizing credit risk in turbulent times
From a policy standpoint, the rules of the internal risk framework to limit credit risk at
the dsta have been modified. As a result, the dsta decided at an early stage in the crisis
that cash could only be lent on an overnight basis in case no collateral is provided. The
dsta has effectively managed to minimize counterparty credit risk by following its policy
of only dealing uncollateralised deposits with market participants with two credit
ratings of at least aa- or equivalent. The dsta also intensified the use of lending of cash
in exchange of European government bonds (via buy sell back transactions) to avoid risk
taking. For the coming period, the dsta will continue to keep a sharp eye on current
credit lines.
The dsta uses the isda Master Agreement to enter into derivatives transactions. The
dsta only uses plain vanilla interest rate swaps. By entering into swaps the dsta
addresses interest rate risk (see section 2.1), but at the same time its potential credit risk
exposure increases. The credit support annex to the isda agreement demands from the
dsta’s counterparties to post collateral if their swap position with the dsta is ‘out-ofthe-money’. To prevent an unacceptable exposure to a single counterparty an additional
limit system is in place. An internal review has started to evaluate the current isda risk
framework and to explore possible adjustments to limit credit risk in relation to our
swap portfolio. The dsta will consult with all parties involved on the possible
adjustments.

15

The economy, the budget and the financial markets

17

Measures taken by the government in response to the
financial market crisis have increased the funding need of
the Dutch State. For 2009, the call on the capital market is
estimated at € 48 billion. New benchmark bonds will be
launched in the 3-year, 5-year and 10-year segments. Also
an ‘off-the-run’-facility is introduced for the reopening of
bonds with original maturities of 10-year. On average,
there will be two dsl auctions every month: one regular
and one for the off-the-runs.

Funding and issuance

Funding and issuance

2.1 Looking back
This paragraph reflects on the execution of the funding plan for 2008. The funding
plan and issuance calendar were executed according to schedule up to and including
September, with only some minor modifications. The decisions taken by the
government in response to the financial market crisis necessitated a substantial
increase in the dsta’s funding.
For the sake of clarity, the rest of this section makes a distinction between the regular
activities (in the context of the funding of the government budget) and the specific
operations related to the financial market crisis1.
2.1.1

Funding and issuance

18

Funding of the regular budget
Due to a favourable development in the budget in both 2007 and 2008, the borrowing
requirement in 2008 turned out lower than envisaged in the previous Outlook. It
decreased by H 7.4 bln compared to the December 2007 estimate. During the year, the
borrowing requirement changes one-to-one with the cash balance. The budgetary
windfalls reflected both the strong economic performance of the Netherlands in
recent years and higher natural gas revenues.
In 2007, the cash balance turned out at an unexpected small surplus, reducing the
end-of-year money market volume; this in turn reduced the borrowing requirement
for 2008. For 2008, the initial funding plan was based on a cash deficit of H 0.8 bln,
whereas the September budget update indicated a surplus of H 3.9 bln. This windfall
lowered the regular borrowing requirement by a further H 4.7 bln, to the current level
of H 37 bln.

Table 2.1

Borrowing requirement and funding in 2008 (excl. financial market measures), € bln
Outlook 2008

End of year update

Spring update

September update

Capital market redemptions

21.5

21.5

21.5

21.5

Money market ultimate 2007

22.1

19.4

19.4

19.4

Cash balance 2008

-0.8

-0.8

+2.5

+3.9 *

Total borrowing requirement

44.4

41.7

38.4

37

Capital market

24

24

24

21

Money market ultimate 2008

20.4

17.7

14.4

16

Total funding

44.4

41.7

38.4

37

* The Autumn update was not yet available at the cut-off date

To accommodate the budgetary windfall, the main adaptation made to the original
funding plan was to reduce the call on the money market and – only in second
instance – to lower the call on the capital market. Absorbing budgetary windfalls by
adjusting the call on the money market fits well with the dsta’s standard policy; it
also illustrates the important buffer function of the money market. Because of the size
of the budgetary windfall, the dsl issuance target of H 24 bln was not attainable.
The improvement in the budget was instrumental in the decision of the dsta to hold
the size of dsl auctions to the lower end of the target ranges in July and September.
The money market funding also turned out lower than earlier envisaged (end of year
volume of H 16 bln).

1

More than ever, due to the exceptional circumstances, the numbers in this chapter are preliminary.
In January 2009, the dsta will publish the final numbers.

As in every year, in 2008 a new benchmark 10-year bond was launched via a Dutch
Direct Auction (dda). This year, the dda was held in February. The choice for
auctioning earlier in the year than in 2006 and 2007 had practical considerations. To
sample costs (and risk) as much as possible, auctions had to alternate between the new
3-year and new 10-year dsls. In order to do so, a dda early in the year was preferable,
after having launched the new 3-year in January. Three pds – Credit Suisse, Fortis and
rbs – executed the role of dda advisor. Demand for the new benchmark bond was
healthy, with a book size at the time of closure of over H 15 bln. Total allocation was
set at H 6.6 bln euros, with 60% distributed to real money accounts. The spread was
fixed at 17 basis points over the German reference Bund, with a 100% allocation at the
cut-off spread for real money investors and 35% to other accounts. With subsequent
re-openings in June and September, the volume of this loan is now H 10.7 bln. The
new 3-year bond reached a volume of H 13 bln with the last reopening in November.

Box 2 – Risk management: implementing the benchmark
The Netherlands, like most other countries, applies a debt management policy to fulfil
the borrowing requirement at lowest possible costs under acceptable risk. In 2008, the
dsta implemented a new risk management framework.
The new framework consists of a 7-year constant maturity portfolio as a benchmark for
the national debt, as explained in more detail in the Outlook 2008. This risk profile
can be achieved by issuance in one tenor only. In practice however, the dsta issues
in different maturities using a combination of instruments. Any desirable risk profile
can be achieved by entering into interest rate swap (irs) agreements. To comply with
the new risk management framework on 1 January 2008 the dsta has been more active
(on a regular basis) in the swap market during the second half of 2007. As a result of
restructuring the risk profile of the State’s debt portfolio, the swap portfolio grew from
a notional amount of € 50 billion mid 2007 to over € 175 billion towards the end of 2007.
Towards the end of 2007 the risk profile of the debt portfolio was reshaped to fit the risk
profile required by the benchmark.
Experience so far
Looking back, the restructuring in the second half of 2007 was initiated and completed
during a period in which the swap curve was rather flat, with a relatively small spread
between the 3 and 10 year swap rates. The flat swap curve allowed the dsta to
restructure the risk profile at hardly any cost at all. During the restructuring the dsta
entered into a notional amount of € 71.3 billion payer swaps and into € 53.7 billion
receiver swaps. A result of the restructuring the initial net swap position of € 7.6 billion
paying 6 month Euribor changed into a net position of over €10 billion receiving 6
months Euribor. The size of the net position changed during 2008 by entering in new
swaps and the expirations of old ones, but the position remained a net receiving position
in 6 months Euribor. In the first quarter of 2008 the spread between 6 month Euribor and
the 7-year swap increased, resulting in a windfall profit vis-à-vis the benchmark.

Funding and issuance

DTC Issuance
The dtc issuance calendar up to September 2008 followed the usual pattern. By
applying a standardised maturity composition of the dtc issuance throughout the
year, the dsta aims to obtain optimal transparency. In the year up to (and including)
September, the dsta issued a total gross amount of H 47 bln euros. After expiration
of the September 2008 dtc programme, the outstanding volume was H 21.6 bln. On
7 July, an off-the-run programme – the August 2008 – was reopened, in addition to
the regular schedule. With this issuance, the dsta aimed to cover a temporarily
higher funding need related to the dsl redemption on 15 July 2008. An amount of
H 1 bln was raised; this was marginally less than initially planned, due to the
opportunities offered in the market for commercial paper.

19

In 2008, every dsl issuance has been swapped to the 7-year benchmark. New swaps in
the 3-year (receive), 10-year (receive) and 7-year segment (payer), have further increased
the notional amount of our swap portfolio. Figure 2.1 represents the total notional
amount of swaps concluded since 2001, the year in which the dsta first starting using
irs’s (see also table 4 in the Statistical Annex).
The goal of the dsta is to have an actual debt portfolio (incl. swaps) that performs at
least as well as the benchmark portfolio. Preliminary results indicate that until now the
actual portfolio has outperformed the benchmark. In 2009, the dsta will report on its
performance vis-à-vis the 7-year benchmark.

Size of notional swaps (as at June 2008), per maturity, since 2001*, bln €

Figure 2.1

20

15

5
0
-5
-10
-15

>2035

2030-2034

2025-2029

2019

2018

2017

2020-2024

maturity

2016

2015

2014

2013

2012

2011

2010

-25

2009

-20

2008

Funding and issuance

10

payer and receiver swaps (2008 q2)
payer and receiver swaps (2008 q1)
payer and receiver swaps (2007 q3-q4)
payer and receiver swaps (2001-2007 q2)
* payer swaps are represented as negative; receiver swaps as positive

2.1.2
Funding related to financial market investments
Since late September, the Dutch government took a number of far-reaching measures
to help stabilise the financial sector in the Netherlands, including its financial
institutions. Elsewhere in the Europe similar measures were taken.
The measures
Below, the measures taken are listed in chronological order (cut-off date is 14
November). Some measures have had a direct impact on the funding need of the
Dutch State, whereas other measures only create contingent liabilities or have no
impact whatsoever on the dsta’s funding. All measures are temporary.
• On 23 September, a prohibition was announced on naked short selling in shares of
financial institutions. This measure was aimed at countering speculation on price
losses. Later, the ban was extended to ordinary (including naked) short selling in
shares of financial institutions.
• On 28 September, joint action was taken by the Dutch, Belgian and Luxembourg
governments to invest H 11.2 bln in support of Fortis. The Dutch government
invested H 4 bln in Fortis Bank Nederland Holding in exchange for a 49% stake.
It was also decided that Fortis would sell its stake in abn amro (consisting mainly
of the retail business), excl. the asset management part which had already been
integrated into Fortis.

2

To assist the dsta in gradually raising the capital needed to fund fbn, the Dutch Central bank granted a bridge loan to
fbn. This allowed the dsta to fund the deal more gradually. The bridge loan was repaid before the end of October.

21
Funding and issuance

• On 3 October, the Dutch State took over all shares of Fortis Bank Netherlands
(fbn), Fortis Insurance Netherlands and Fortis Corporate Insurance. The shares
were acquired from the listed companies Fortis sa/nv and Fortis nv, for a total of
H 16.8 bln. With this transaction, the Dutch state also became owner of the Fortis
share in abn amro Holding. The agreement replaced the 49% participation
reached one week earlier. As part of the deal, it was agreed to provide fbn with
short-term funding (on market based terms) in the amount of H 34 bln, enabling
them to repay short-term debts to Fortis Bank Belgium (fbb) and to repay an
emergency lending facility (ela) of the Dutch central bank2. Also H 16 bln in longterm debt to fbb was taken over by the Dutch State. The take-over of fbn is a
temporary measure: once the international financial system has settled, the
institutions will be privatised again.
• On 7 October, the government announced an increase in the maximum amount
covered by the deposit guarantee scheme applicable to all banks operating under
the supervision of the Dutch central bank. The limits were raised from H 20.000
to H 100.000 for the first portion, and from H 40.000 to H 200.000 for the second
portion (with a 10% excess).
• On 9 October, it was announced that the Netherlands would be prepared to
strengthen the balance sheet of financial institutions that are financially healthy.
To that end, a minimum amount of H 20 bln was immediately made available.
• On 19 October, ing was the first to use the facility made available earlier for
recapitalisation and strengthening of balance sheets of healthy financial
institutions. It was agreed that the government would reinforce ing’s core capital
by H 10 bln, by obtaining 1 billion securities at H 10 each. The securities have largely
the same features as shares and qualify therefore as core tier-1 capital.
Understandings were made with respect to executive pay and the nomination by
the government of two members for the Supervisory Board. The interest rate on
the securities is set at 8.5%, to be payable only if dividends are paid. Should the
dividend in the relevant year exceed the coupon of H 0.85, the coupon payment will
be increased, up to 125% of the dividend in the third year. ing may terminate this
scheme at all times by repurchasing the securities in cash at 150%. After 3 years, ing
has the right to convert the securities into ordinary shares. The State has the right
the decline this offer and ask for repayment of the original sum of H 10 bln.
• On 23 October, a H 200 bln guarantee scheme for the issuance of medium term debt
by banks became effective. The scheme was designed to help restore the funding of
financial institutions, thereby safeguarding corporate and household loans. The
guarantee scheme targets non-complex senior unsecured loans; ‘plain vanilla’
commercial paper, certificates of deposit, and medium term notes, with maturities
ranging from 3 to 36 months. Fees will depend on the creditworthiness of the
banks involved and will be based on historical credit default swap spreads, with an
addition of 50 basis points. Maturities of less than a year will have a fixed fee of 50
basis points. The scheme will be executed by the dsta, publishing all relevant
information for investors on its website. All Dutch banks meeting the criteria of
the guarantee scheme will be eligible. The Dutch central bank will be consulted to
determine the banks’ solvency position and liquidity profiles.
• On 28 October, aegon was the second financial institution to apply for a share of
the H 20 bln recapitalisation fund. It was agreed that the government would
reinforce aegon’s core capital by H 3 bln. The securities have largely the same
features as shares and qualify therefore as core tier-1 capital. The details of the deal
are largely similar to the one concluded with ing.

• On 12 November, sns Reaal was the third party to apply for the recapitalisation
fund. It was agreed that the government would reinforce the core capital of sns
Reaal by H 750 mln. The details are largely similar to the previous two deals
described above.
Additional funding: the size
The measures combined caused a substantial increase in the dsta’s funding need. We
have been able to fulfil the increase borrowing requirement by using the flexibility of
the dtc-market and the market for ecp, and also by increasing our call on the capital
market. As we value continuity highly, we chose not to dramatically alter our existing
strategies.

Funding and issuance

22

Table 2.2 summarises the consequences of the different measures for the 2008
funding need of the Dutch State. The total funding need increased by H 80.5 bln, of
which H 46.5 bln is of a more or less medium to long-term nature and H 34 bln is
short-term (entirely related to funding of fbn).
Table 2.2

Funding need related to government intervention in the financial sector, € bln

			

Total

Medium- term Short-term

1a Acquisition of fbn (incl. abn amro)

16.8

1b Take-over of short-term debt of fbn

34.0

1c Take-over of long-term debt of fbn

16.0

16.0

2

13.7

13.7

80.5

46.5

Core capital to ing, aegon and sns Reaal

Total

16.8
34.0

34.0

The short-term funding need is expected to last for a maximum of approximately
one year, although the exact term depends on the ability of fbn to acquire funding in
the market by itself. The medium-term funding need relates entirely to the capital
investments done by the government in financial institutions (and the take-over of
long-term debt of fbn). The time frame of the investments is uncertain, although the
Minister of Finance has indicated that his aim is to sell the government assets as soon
as possible.
Additional funding: the instruments
Due to its flexibility, the vast majority of the increased funding need was covered on
the money market, with the capital market satisfying only a small part. The capital
market was used by increasing the regular November tap auction for the 4% dsl 15
January 2011. The initial target amount of H 1.5 – 2.5 bln was increased to H 2.5 – 4.5
bln. The total amount allocated was H 4.6 bln (incl. the non-comp.). In addition, it was
decided to use the reserve tap date on 9 December.
The dsta entered the money market by using all available instruments.
Firstly, the dsta adjusted its t-bill auction schedule to the new circumstances.
That was done through four different channels:
a Stepping up the frequency of auctions – The dsta announced that next to the
regular auctions on the 1st and 3rd Monday of every month, the in-between
Mondays could also be used. Although the dsta has held weekly auctions ever
since 6 October, the decision to employ the extra dates was taken on a case-by-case
basis.
b Offering extra dtc-programmes – Normally, every auction offers two different
programmes, one in the 3-month segment and one in the segment up to 12 months.

Figure 2.2 Amounts raised in DTC-auctions, € bln
12
10

8

6

4

2

0

6 Oct

13 Oc

20 Oct

27 Oct

3 Nov

10 Nov

23

By adapting the t-bill auctioning schedule along the lines described above, the dsta
was able to create additional funding opportunities and at the same time satisfy
market demand for short-dated government paper. By adding programmes the
redemption profile of t-bills was smoothed, thereby limiting roll-over risk. All-in-all,
we feel that an adequate balance has been struck between long-term commitment to
the dtc-market and short-term flexibility the money market offers. Figure 2.2 shows
the amounts raised in subsequent dtc auctions.
Secondly, the dsta used its Euro Commercial Paper (ecp) programme to raise large
amounts of cash up to 3 months. Especially during the first weeks of October, demand
for Dutch sovereign commercial paper was very high, both in us dollars and euros.

The dsta first introduced the commercial paper programme in July 2007. It has proven
to be an excellent addition to the existing money market instruments. With commercial
paper, the dsta can satisfy its short-term funding need in a flexible and cost efficient
way, without interfering with the T-bill programme.
ecp has been far more successful than previously thought. The issuance of us dollar
denominated paper has broadened our investor base. It has also proven cost-effective,
without an increase in risk (the foreign currency exposure is fully hedged). In addition,
ecp provides more flexibility than dtcs. While normally T-bills have standard maturities
and fixed expiration dates, ecp can be tailor-made, agreeing on maturities between the
dsta and the investor. Especially the possibility of offering so-called broken dates has
proven to be very successful in attracting (new) investors.

Funding and issuance

Starting on 6 October, the dsta constantly added 2 programmes to the existing
calendar.
c Reopening off-the-run programmes – In normal circumstances, the segment up to
3 months is only covered by ecp and cash/deposits. In response to both the extra
funding need and shortages in the market for dtcs, the dsta decided to reopen
the October and November programmes early October.
d Introducing new dtc-programmes – For cash management reasons, regular dtcprogrammes have end-of-month expiration dates. The corresponding cash
outflows provide a good hedge for cash inflows following tax revenues. To prevent
an undue increase in roll-over risk as a result of regular programmes becoming
quite large, extra T-bill programmes were added with intermediate (mid-month)
expiration dates. The 19 November and 17 December 2008 programmes were first
launched on 13 October. In November, the 18 February 2009 and 18 March 2009
programmes were added. All expiration dates were set to match settlement dates of
regular dtc auctions.

Initially, it was thought important to keep the market for ecp as much as possible
separate from our existing well functioning market for T-bills. We feared that funding
too much by ecp could cannibalize the market for T-bills. However, the two markets are
clearly separated. The main distinction between the two is that ecp is largely demanddriven, that is: driven by demand of end investors. As a result, the issuance of ecp is less
dependent of the willingness and ability of our Primary Dealers to take securities on their
balance sheets. However, it also means that cp can not be as reliable a source of funding
as dtcs.

Funding and issuance

24

Thirdly, on 3 November the dsta reopened the 3 off-the-run bonds maturing in 2009.
By doing so, we responded to an increased demand in the market for short-term
government paper, as could be seen from significant widening of swap spreads and
the large demand in the extended repo-facility for dsl (explained in section 1.2). As
short term dsls could be considered close substitutes for dtcs, the normal tap
auction procedure for dsls was replaced by the auction procedure that is employed
for dtcs (uniform price auction, no non-comp). A total amount of H 2.5 bln was
raised, with the majority in the 15 July 2009 dsl. By auctioning short-dated bonds,
the dsta was able to fulfil part of its additional funding need short-term, in a money
market segment separated from dtcs and ecp.
At the cut-off date of this Outlook (14 November), the dsta had a volume outstanding
of H 84 bln in dtc’s and ecp. Table 2.3 shows the composition.
Table 2.3

Outstanding amounts DTCs and ECP, as at 14 November 2008

Instrument

Amount

dtcs

€

66.9 bln

ecp (euro)

€

8.5 bln

ecp (dollar)

$ 10.4 bln

ecp (pounds)

£

0.6 bln

Additional funding: the overall picture
The total additional borrowing requirement is H 80.5 bln. Of this, H 46.5 bln is of
a medium-term nature (see table 2.2). In principle, the funding for the H 46.5 bln
should also be medium-term (via the capital market). In 2008, a total of H 15 bln was
already covered on the capital market:
• H 5 bln via an increased tap in November and by employing the reserve tap date
in December3;
• H 10 bln via a private agreement with fbb in which the Dutch State replaces fbn
as a debtor for long term debts owed to fbb.
The remaining medium-term funding need will be covered on the capital market
in 2009 and 2010, as will be explained in section 2.2.
Table 2.4

Covering the extra 2008 funding need, € bln

Covered on capital market (issuance dsls)

5.0

Covered on capital market (private placement)*

10.0

Covered on money market**

65.5

Total

80.5

* This concerns € 10 bln of long-term debt of fbn
** Of which € 2.5 bln through reopening of the 3 2009 dsls

3

This is an estimate. The result of the December auction could not be included in the Outlook (cut-off-date is
14 November).

The remaining H 65.5 bln has been covered on the money market. As a result, this is
the amount by which the money market volume at the end of 2008 will increase
beyond the level of H 16 bln that was already envisaged based on the funding plan for
the regular budget (table 2.1). Combining regular funding and exceptional funding,
the end of 2008 outstanding money market volume is now projected at H 81.5 bln.
Total funding: the overall picture
Table 2.5 splits the total borrowing requirement in 2008 into its components. The
total need equals H 117.5 bln, made up of redemptions (of both dsls and money
market instruments), the cash surplus in the regular budget and the financial crisis
related expenditures.
Table 2.5

25

Overall borrowing requirement and funding in 2008, € bln
21.5

Money market ultimate 2007

19.4

Cash surplus 2008 (regular budget)*

- 3.9

Financial sector expenditures

80.5

Total borrowing requirement

117.5

Capital market

36.0

Money market ultimate 2008

81.5

Total funding

117.5

* Budget Memorandum 2009, September 2008

The end of year money market volume of H 81.5 bln is one of the components
determining the borrowing requirement for 2009 (see the next section).

Box 3 – The impact on EMU-balance and EMU-debt
The regular cash balance in the budget is in surplus in 2008. The actual cash balance is
strongly negative, due to the government’s capital investments in the financial sector.
Interestingly, the emu-balance in the budget is not influenced directly by the financial
sector expenditures.
The cash balance and emu-balance are different concepts. Differences between the two
concepts can be explained by two types of transactions.
First, transactions resulting in cash flows in a year different from the transaction year
( the ‘emu-balance’ is transaction based). These are so-called ‘cash-transaction
differences’, resulting for instance when contracts are signed with multi-year payments.
Second, financial transactions. These include, amongst others, the provision of student
loans, receipts due to privatisation and loans granted by the Cash Management Division
to decentralised government entities (see chapter 4). Also the € 80.5 bln expenditures
done by the government in relation to the financial crisis are labelled as financial
transactions. Financial transactions are left out of the emu-balance because of the
assumption that they have no impact on the government’s net assets (wealth); the
increase in liabilities (gross debt) is offset by an increase in financial assets. However,
there is an indirect effect on the emu-balance: interest costs on the additional funding
and dividends or coupons received on the investments are included in the emu-balance.
The € 80.5 bln extra funding need causes an immediate increase in the level of gross state
debt. The extra funding equals approx. 14% gdp, increasing gross state debt from 35% to
49% gdp. Of this increase, 6% gdp is short-term (expected to be repaid before end 2009)
and 8% is medium-term.

Funding and issuance

Capital market redemptions

2.2 Funding plan for 2009
The borrowing requirement for 2009 has three components:
1 dsl redemptions – In 2009 three bonds with original maturities of 3, 5 and 10 year
will mature. Total redemptions equal H 32.2 bln4.
2 The budget balance – The Budget Memorandum published in September projected
a cash surplus in 2009 of H 3.4 bln. The Autumn update was not yet available at the
cut-off date. For now, the H 3.4 bln surplus is the number included in the funding
plan.
3 The money market volume at year’s end – Following the analysis in the previous
section, the now anticipated money market volume at the end of 2008 amounts to
H 81.5 bln (table 2.5)4.

Funding and issuance

26

Altogether, this results in a total borrowing requirement for 2009 of H 110.3 bln. The
exact number will depend on developments (in the budget and otherwise) in the rest
of 2008. At the end of January, the dsta will publish the updated projections for the
borrowing requirement in 2009, based on the actual 2008 funding.
Table 2.6

Borrowing requirement and funding in 2009, € bln

Capital market redemptions

32.2

Money market ultimate 2008

81.5

Cash surplus 2009*

- 3.4

Total borrowing requirement

110.3

Capital market

48.0

Money market ultimate 2009

28.3

Repayment short term debt by fbn

34.0

Total funding

110.3

* Based on Budget Memorandum 2009, September 2008

As always, the total borrowing requirement is split between the capital market and
the money market. The call on the capital market is set at H 48 bln. Additional
funding needs arising in the rest of 2008 (the cut-off date for this Outlook is 14
November) and 2009 will be covered on the money market. If windfalls would occur,
the call on the capital market will be reduced. This ‘policy line’ deviates from the line
chosen during the most recent years, in which windfalls would lower the money
market and setbacks would increase funding on the capital market. The change in
policy is motivated by the already substantial call on the capital market.
The size of the money market at the end of 2009 will be determined in part by the
degree in which fbn will be able to repay its short term funding to the Dutch State.
For now, it is presumed that fbn will repay all short term debt before the end of 2009.
In that case, an end of year money market volume is projected of H 28.3 bln. The
relatively higher level compared to previous years can be explained by the fact that
part of the additional medium-term funding need (see table 2.2) will be temporarily
covered short-term in 2009.
Capital market issuance in 2009
The dsta is planning to satisfy the call on the capital market of H 48 bln by issuing
three new benchmark bonds and by reopening a number of off-the-run bonds. More
specifically:
• A new 3-year bond (the dsl 15 January 2012) will be launched in January 2009, via
4

For sake of clarity and with reference to section 2.1, the € 2.5 bln that was raised in the 3 2009 dsls on 4 November is
included in the money market volume ultimate 2008.

•

•

•

•

In 2009, two ddas are planned for, one in February (10-year) and one later in the year;
the specific window for the second dda will be determined later. The new 3-year bond
will be launched through a regular tap auction. Reopenings of all the three new
benchmark bonds will be done through regular tap auctions to be held on every
second Tuesday of the month.
By reopening the original 30-year dsl launched in 1998, the dsta shows its
commitment to the long end of the curve. At this time, no plans exist for a new
30-year bond. Taking into account the 7-year benchmark – as the operational risk
management tool for the national debt, see section 2.1 – the long term segment of the
dsl curve is not attractive at this time. The preferred trade-off between costs and risk
therefore does not allow for new ultra-long benchmark bond. If market circumstances
change, the appraisal may change as well.
The reopenings of the off-the-run bonds will not take place on the regular tap dates.
It was decided to fix the date for the reopening facility on the fourth Tuesday of the
month. The first off-the-run auction will be on 26 January. Different from regular
dsl auctions is that the dsta will make available a number of different off-the runs
at the same time. The selection of the specific off-the runs will be made public in the
quarterly issuance calendars. By auctioning more than one dsl, the dsta is able to
increase the outstanding amount of bonds gradually, while at the same time having
the opportunity to respond to market circumstances (in casu: allocating more in
those bonds where demand is highest). In principle, the off-the-run facility will be
employed every month or at least until the total target volume (of between H 10 and
14 bln) has been reached.
The issuance calendar is included at the end of this chapter. The first quarter starts
with the launch of the new 3-year benchmark dsl 15 January 2012, followed by the
dda for the new 10-year dsl in February. The regular tap date in February will not be
used. In March the new 3-year will be reopened. Every fourth Tuesday, the reopening
facility will be activated for a number of different off-the-run dsls. In January, the
dsta will outline in more detail how the off-the-run facility will be operated and by

27
Funding and issuance

•

a regular tap auction. Subsequent reopenings should increase the outstanding
volume of the bond to a level between H 10 and 14 bln before year’s end.
A new 10-year bond will be issued in February 2009, through a dda. Subsequent
reopenings should increase the outstanding amount of the bond to a level between
H 10 and 14 bln before year’s end.
A new 5-year bond will be issued later in the year, also by means of a dda.
Subsequent reopenings should increase this bond to a level between H 10 and 14 bln
within 12 months of its initial launch.
The 5.5% dsl 15 January 2028 will be reopened once for a target amount of H 1.5
to 2.5 bln. This will increase its total size to a level above the benchmark volume
of H 10 bln. The timing of this bond auction strongly depends on market
circumstances.
A number of off-the-run bonds will be reopened for a total amount of H 10 to
14 bln. The selection of the specific dsls will be made on a case-by-case basis,
depending for instance on market circumstances and the demand in the market
(benefiting from the information of Primary Dealers). The focus will be on the dsls
maturing between 2011 and 2016.
Other possibilities for issuance on the capital market are a foreign currency bond
(if the market would offer such an opportunity) and the issuance of principals of
the 3.75% dsl January 2023 (if there would be sufficient market demand).

which auction method. The specific details for rest of the year are made public via the
consecutive quarterly issuance calendars and the Quarterly Outlooks.

Box 4 - Additional report on inflation linked bonds

Funding and issuance

28

In 2005, a study was published on the merits of issuing inflation-linked bonds. The study
– a combined effort of dnb, cpb and dsta – concluded that the Dutch State would not
issue index-linked bonds. The principal argument was that adding index-linked bonds
to the national debt portfolio would not offer any efficiency benefits. The addition
of index-linked bonds would result in greater fluctuations in interest costs, without
being balanced by commensurate savings. In terms of costs and risks in the budget, the
existing (i.e. nominal) portfolio would be economically more efficient. In September
2008, the dsta updated the 2005 study. The additional report was written in response
to a request by the Dutch parliament. The full report is available on the dsta’s website.
This box summarizes the report.
Index-linked bonds and associated derivates make it possible for savers and pension
funds to hedge their inflation risks. Index-linked bonds and inflation derivates make up
a growing share of the portfolios of Dutch pension funds. Similarly, the number of
countries issuing index-linked bonds is also rising steadily. Despite these developments,
however, there are no indications that in the present situation index-linked bonds would
result in lower borrowing costs for the Dutch State given the level of risk, compared with
the current nominal money and capital market instruments. As such, in terms of the
business case, the analysis does not present any grounds for revising the 2005
conclusions.
Two qualifications should be made here. Firstly, the willingness of investors to pay for
index-linked bonds linked to the Dutch cpi may be greater than the premium that
investors pay for index-linked bonds linked to the French or European price index, based
in part on the volume of Dutch pension savings and on the emphasis on defined benefit
systems. Secondly, the need for a pension fund to limit risks depends on the age-profile
of its members. The older a pension fund’s members are, the lower its targeted risk
profile is. This may have a positive effect on the demand for index-linked bonds. As such,
it is possible that as some point index-linked bonds may become an attractive economic
alternative for financing the national debt.
In addition to economic arguments, other reasons may exist for the government to issue
index-linked bonds. For example, index-linked bonds may help stabilise the emu
balance, if inflation and the emu-balance are positively correlated. As was the case with
the previous study, insufficient evidence has been found of a positive correlation
between the Dutch rate of inflation and the emu-balance, and as such insufficient
grounds exist for assuming that issuing index-linked bonds will result in a more stable
emu-balance. However, the possibility should not be excluded that following the current
budgetary rules – in which interest costs have been excluded from the expenditure
framework – the correlation between inflation and the emu-balance could become
stronger. Unforeseen changes in interest costs do no longer trigger changes elsewhere in
the budget.
Another argument for structurally issuing index-linked bonds would be to promote
financial innovation. The government could serve as the driving force behind a private
market for inflation-indexed products. The desirability of such a scenario should be
determined by comparing the societal benefits of this missing market with the additional
costs that the government expects to incur for a particular risk.

DTC Issuance
The dtc calendar follows the usual pattern. Each quarter, two new 6-month
programmes and one new 12-month programme will be introduced. dtc auctions
will take place on the first and the third Monday of the month. Auctions start at 11.00
hrs cet and end at 11.30 hrs cet. The (provisional) calendar for the entire year is
published at the end of this chapter. The calendar is similar to the calendar issued last
year.
Following the adjustments made to the dtc auction schedule in the last quarter of
2008 (see section 2.1), the dsta explicitly keeps open the option of adding additional
programs to existing auctions or to add auction dates. Adjustments will be made if
the funding need necessitates doing so. Changes to the calendar will be published
well in advance.

29
Funding and issuance

DSL calendar 2009
Regular auction

Off-the run facility

Month of issue

Auction date (2nd Tuesday)              details

Auction date (4th Tuesday)**

January

13

tap NEW 3-year

27

February

*

DDA 10-year

24

March

10

reopening 3-year

24

April

14

tap

28

May

12

tap

26

June

9

tap

23

July

14

tap

28

no auction

no auction

August

Funding and issuance

30

September

8

tap

22

October

13

tap

27

November

10

tap

24

December

8

tap

22

* Date for the dda is to be determined
** Action dates will be used as long as the total target volume has not yet been reached.
Announcement for all auctions is at t-6 (Wednesday prior to the auction)
Settlement is t+3 (Friday following the auction)

DTC calendar 2009

Date
auction

Date
settlement

DTC
3-month

05-01-09

07-01-09

31-03-09

19-01-09

21-01-09

30-04-09

02-02-09

04-02-09

30-04-09

16-02-09

18-02-09

29-05-09

02-03-09

04-03-09

29-05-09

31-08-09

16-03-09

18-03-09

30-06-09

30-09-09

06-04-09

08-04-09

30-06-09

20-04-09

22-04-09

31-07-09

04-05-09

06-05-09

31-07-09

18-05-09

20-05-09

31-08-09

02-06-09 *

04-06-09

31-08-09

30-11-09

15-06-09

17-06-09

30-09-09

31-12-09

06-07-09

08-07-09

30-09-09

20-07-09

22-07-09

30-10-09

03-08-09

05-08-09

30-10-09

17-08-09

19-08-09

30-11-09

07-09-09

09-09-09

30-11-09

26-02-10

21-09-09

23-09-09

31-12-09

31-03-10

05-10-09

07-10-09

31-12-09

19-10-09

21-10-09

29-01-10

02-11-09

04-11-09

29-01-10

16-11-09

18-11-09

26-02-10

07-12-09

09-12-09

26-02-10

31-05-10

21-12-09

23-12-09

31-03-10

30-06-10

* Tuesday
Shaded areas indicate new programmes

DTC
6-month

DTC
9-month

DTC
12-month
31-12-09

30-09-09
31-07-09
31-12-09

31-03-10
31-12-09
30-10-09
31-03-10

30-06-10
31-03-10
29-01-10
30-06-10

30-09-10
30-06-10
30-04-10
30-09-10

31

New developments

33

Primary Dealers and Single Market Specialists help the
dsta to achieve the goal of maintaining a healthy and
liquid market for Dutch securities. For 2009, the dsta
has selected a group of 16 market makers, of which 13 are
Primary Dealers. Since 1 April 2008, pd’s select a platform
of choice to fulfil their quotation obligations. The primary
objective is to secure price transparency. First experiences
with the new system are encouraging.

Primary and secondary markets

Primary and secondary markets

3.1 PDs and SMSs: ranking 2008 and selection 2009
Since 1999, every year Primary Dealers are selected to promote, distribute, and
contribute to the secondary market liquidity of dsls and dtcs. The dsls are sold
to the Primary Dealers through tap auctions held by the dsta. New benchmark
issuances are sold directly to end investors through the Dutch Direct Auction method,
with the Primary Dealers as intermediates. dtcs are distributed to both Primary
Dealers and Single Market Specialist through regular single-price (Dutch) auctions.

Primary and secondary markets

34

Being a Primary Dealer entails both rights and obligations. Primary Dealers have the
exclusive right to buy dsls from the dsta. Furthermore, they can conduct swaps
with the Dutch state and are entitled to the repo and strips facility. For their efforts,
Primary Dealers receive compensation, in the form of a non-competitive bid, i.e. the
right to buy additional bonds up to 3 days after auction, at the weighed average price
of the auction. Whether a Primairy Dealer receives the right of non-comp depends on
whether he has met his quotation obligation on the secondary market (see section 3.2)
and on the volumes purchased in the tap auction (the amount should be at least 3% of
the total). Compensation in the dda is settled in the form of fees, which depend on
the volume of dsls that a Primary Dealer is able to place with end investors and on the
type of investor. Full details of the mutual rights and obligations can be found in the
contracts, available on-line at www.dsta.nl.
Ranking 2008
Primary Dealers and Single Market Specialist are periodically evaluated with respect
to their primary market performance. Their performance depends on the volume of
purchases in the dsl and dtc auctions. The top 5 performers in the dsl and the dtc
primary markets in 2008 are ranked below.

Top 5 Primary Dealers for DSLs
based on primary issuance,
January - 14 November 2008
Fortis Bank nv/sa
Royal Bank of Scotland*
ing
Credit Suisse
hsbc France
* Including the share of abn-amro in the first quarter

Top 5 Primary Dealers and Single Market Specialists
for DTCs based on primary issuance,
January – 14 November 2008	 	
Royal Bank of Scotland*
bnp Paribas
Société Générale
ing
Citigroup
* Including the share of abn-amro in the first quarter

Primary Dealers and Single Market Specialists in 2009
Each year the Primary Dealers are selected based on the business plan they have
submitted to the dsta. Once approved, the Primary Dealer contract is valid for one
calendar year. The dsta is proud to present its list of Primary Dealers for 2009. New
in 2009 is natixis, which has been a long standing Single Market Specialist. The
bank is now welcomed in the group of pds. The dsta has a total of 13 pds in 2009.

Primary Dealers for 2009 in alphabetical order
Barclays Capital

Additional to the group of Primary Dealers, also a number of Single Market Specialists
is selected. Just like the Primary Dealers, the Single Markets Specialists have the
right to participate in the dtc auctions and have market making obligations in the
secondary dtc market. The list of Single Markets Specialists in presented below. With
a group of in total 16 banks for dtcs, the promotion and distribution of dtcs is
adequately safeguarded.

Single Market Specialists for 2009 in alphabetical order
Goldman Sachs
JP Morgan
Rabobank

3.2 First experiences with multiplatform quotation
In April 2008, the dsta introduced a new method for the quotation of Dutch bonds.
Since then Primary Dealers (pds) are allowed to select a platform of choice on which to
fulfill their quotation obligation, provided that the platform meets certain objective
criteria. pds are obliged to quote firm prices of dsls within a certain spread for a
minimum of five hours per day. Although our experiences are still limited, our
impression is that the new rules are successful. The accomplishments of the pds have
visibly improved, whereas the daily feedback by the dsta on their performance is
more accurate and transparent. Several other dmo’s are looking into the possibilities
of adopting the multiplatform system as well.
Background
The aim of the quotation obligation is to provide all market participants with price
transparency through arbitrage free reference prices. Over the last few years, the
notion has grown that the quotation obligation should no longer be restricted to a
single platform. Technological change has made it possible for market makers to
aggregate quotes from different platforms in such a way that a trader is able to

35
Primary and secondary markets

bnp Paribas
Calyon
Citigroup
Credit Suisse
Deutsche Bank
Dresdner Bank
Fortis Bank nv/sa
hsbc France
ing
natixis
Royal Bank of Scotland
Société Générale

automatically execute transactions at the best possible prices available to the
platforms that are accessible. Allowing pds to fulfill their quotation obligation on
more than one platform promotes competition. In combining low entry barriers for
market takers, the dsta is creating one virtual arbitrage free marketplace.

Primary and secondary markets

36

At this time the four platforms that are selected for quotation are icap Electronic
Broking, eurex Bonds GmbH, bgc Brokers lp en mts Amsterdam bv. The dsta uses
an open ended application procedure, meaning that a platform can be added if put
forward by a pd and if it meets the necessary requirements. Among the most
important requirements is that the bid and offer prices at which pds can execute
trades are available to investors in real time and ‘at reasonable commercial terms’.
Since its inception, the majority of pds chose to fulfil by their quotation obligation
through mts Amsterdam.
The system
Under ‘normal’ circumstances pds have to quote dsls within a given spread
(which depends on the maturity of the bond, see table 3.1). Under ‘exceptional’
circumstances, this system is replaced by one based on peer review, in which pds
should quote a bond within one standard deviation of the average spread quoted.
When spreads are tightening, the quotation requirement may enter a situation of
normal circumstances. This happens when more than half the pds reach a spread
within the standard limitation (in table 3.1). Whether normal or exceptional
circumstances apply can therefore differ from bond to bond, depending on the
accomplishments of the pds.
Table 3.1

Quotation obligations under normal circumstances
Maximum b/o spread

Minimum quantity

DTCs

4 basis points

€ 10 million

Bonds 1¼ years to 3½ years*

4 ticks #

€ 10 million

Bonds 3½ years to 6½ years*

5 ticks

€ 10 million

Bonds 6½ years to 13½ years*

7 ticks

€ 10 million

Bonds 13½ years to 17½ years*

12 ticks

€ 5 million

Bonds over 17½ years*

20 ticks

€ 5 million

* remaining maturity
# 1 tick is 1 euro cent per € 100

Fulfilling the quotation obligation is a necessary condition for pds to obtain the noncompetitive bid (ncb) rights they can receive following a dsl auction. A pd fulfils
his quotation obligation if, on a monthly basis, he reaches an average daily score of
at least 90% for the months between two dsl auctions. The specific score of a pd
depends on three variables: the number of dsls quoted, the tightness of the b/ospread and the number of hours during which the bonds are quoted. pds that buy
at least 3% of the tap auction and have been compliant with the quotation obligation
are entitled to 15% ncb rights in proportion to their participation in the tap auction
concerned. The ncb rights of pds that do not fulfill these requirements are
redistributed among the pds that are entitled. As a consequence, ncb rights of
individual pds may exceed their 15% share.

Figure 3.1

Average bid/offer spread*, 1 April - 31 October 2008

1,8
1,6
1,4
1,2
1
0,8
0,6
0,4
0,2

1 Apr

3-year dsl

1 May

1 Jun

10-year dsl

1 Jul

1 Aug

1 Oct

30-year dsl

37

* Average bid/offer spread in euro’s per € 100

The dsta will continue to improve the multiplatform system by maintaining a
continuous dialogue with traders and platforms. Adding dtcs to the range of
products that can be quoted dealer to dealer in a multiplatform environment will
be considered.

Primary and secondary markets

Impact on the market
Given this year’s market situation it will be no surprise that up till now exceptional
circumstances have prevailed. This means that right from the start, the system has
been based on peer review. Even under difficult market circumstances pds have been
able to continue quoting dsls, which implies that liquidity and the availability of an
arbitrage free price have been secured at all times. Spreads have tightened a lot since
the start of the multiplatform environment, only to widen again from the start of
September, when the situation on the financial markets deteriorated remarkably (see
figure 3.1).

39

In January 2009, the dsta will merge with the Cash
Management Division of the Ministry of Finance. The
new dsta will then combine all internal and external
treasury functions of the central government. At the
same time, the dsta will relocate from Amsterdam to
The Hague, to move in with the Ministry of Finance.
The move and merger open up a new chapter in the rich
history – since 1841 – of the dsta .

The dsta: Move and Merger

The dsta: Move and Merger

4.1 Reorganisation of the DSTA
Nowadays, being a Dutch debt manager is a challenging job. The funding plan for
2009 has been adapted significantly due to the financial crisis, implying more
frequent issues by the dsta on the money and capital markets. The implementation
and execution of the guarantee system for bank debt has had a large impact on the
organisation; we now do not just manage explicit debt, but also contingent liabilities.
Besides these challenges, the dsta opens up another chapter in its rich history, or
actually two chapters. 167 years after its foundation, the dsta will leave Amsterdam.
On 19 January 2009, the dsta will relocate to The Hague and move in with the
Ministry of Finance. The pictures in this Outlook serve as a kind of farewell to
Amsterdam, showing the different buildings the dsta has been housed in since it
started its business, including pictures of the newly renovated Ministry of Finance
at the Korte Voorhout in The Hague.

The dsta: Move and Merger

40

With the move, the opportunity was seized to merge the dsta and the Cash
Management Division of the Ministry of Finance (see chart below) into a new
directorate.
Organisational chart Ministry of Finance

Minister

State-Secretary

Secretary-General

Tax and Custom
Administration

Dutch State
Treasury Agency

Tax and Custom
Policy and Legislation

Financial and
Economic Policy

merger January 2009

Foreign Financial
Relations

Budget

Treasury

Financial Markets

Financing

Cash Management

The name of the new organisation remains Dutch State Treasury Agency. Not much
will change for our counterparts in the market, except the phone numbers and having
to take the train south from Schiphol Airport instead of north to Amsterdam. This
chapter will elaborate on the motives behind the move and on the implications of the
merger for the internal organisation.
Background
Historically, most dmo’s are located in the national financial centre. As such the dsta
has always resided in Amsterdam. This is not a coincidence. Only a few decades ago,
financial markets were bound by domestic borders and all major financial institutions
were clustered within a limited circle of a few square kilometres. This clustering was
a logical consequence of how the financial system worked. There used to be a close
physical interaction between the debt manager and the national financial institutions.
To illustrate, securities were transported physically – even by bicycle! – and investors
had to collect their interest payments at the Agency in cash.

Box 5 – The history of the DSTA
The Netherlands inherited a substantial debt from the Napoleon era. To finance this
debt, all outstanding loans were combined in 1815 into one national debt with an interest
rate of 2.5%. One third of this debt was perpetual, and two thirds redeemable. The socalled Amortization Syndicate – which could be considered a predecessor of the dsta –
was made responsible for the redemption of, approximately, 1200 million Guilders. The
perpetual debt is still under management of the dsta, under the name of Inscription
Registers. The amount outstanding is now a mere € 30 million.
William I was appointed King in 1815. He considered the State’s finances as his sole
domain. Under the command of King William I infrastructure was built, industry was
developed and the merchant navy was expanded. All this involved substantial sums of
money. On top of that, Belgium separated itself from the Netherlands in 1830, to be
recognised by King William I only in 1839. In the nine years in between, a sizeable army
had to be maintained.

Memorandum of Association was somewhat vague on the specific responsibilities of the
dsta. It stated that the newly founded Agency would be responsible for the
‘management of business to serve national interests’. During the years, this rather broad
mission of the dsta was narrowed down from serving the national interests to providing
a solid and efficient funding of the State’s debt.
Every year the Dutch government publishes its financial results, including a chapter on
the National Debt. Debt management is in the public domain, with transparency as a key
principle. A situation like the one in the 19th century – when the level of debt level could
explode without being noticed – is now unimaginable. After the Second World War,
debt declined rapidly.
Figure 4.1

Government debt (% GDP), 1815-2007

250

200

150

100

50

1814 1832 1850 1868 1886 1904 1922 1940 1958 1976 1994
Source: cpb

Source: CPB

The landscape of financial markets has changed dramatically, especially over the last
decades. Money and capital markets in Europe have been largely integrated, physical
transport of securities is a rarity, and coupons and principals are paid electronically.
Furthermore, investors all over the world have Dutch State Loans and Dutch Treasury
Certificates in their portfolios. The dsta’s direct counterparts, like Primary Dealers,
mimic this geographical diversification.

The dsta: Move and Merger

When William I resigned in 1840, finances became the responsibility of the Minster of
Finance. At the same time, the state of the public finances was made public. It was at
that time that it became apparent that the Amortization Syndicate had neglected its task
of redeeming the national debt. Consequently, the organisation was dismantled and on
the 21st of March 1841 the Dutch State Treasury Agency was founded in Amsterdam. The

41

Cover of a classical DSL

The dsta: Move and Merger

42

The globalisation of financial markets and dematerialisation of securities opened up
the possibility to relocate to The Hague, the governmental and political capital of the
Netherlands. At the same time, the decision was made to merge with another part of
the Ministry of Finance, the division responsible for cash management of the central
government. This merger creates a full fledged Treasury department, combining
internal treasury functions and external treasury activities. Starting in January, the
dsta will not only be responsible for its traditional debt and cash management, but
also for internal cash management of the central government, for the strategic
organisation of the State’s payment infrastructure and for estimating the budgetary
cash balance.
The merger and move to The Hague fit the general tendency of centralizing and
bundling activities that are interrelated and exhibit similar characteristics. In
addition, the operation is part of the overall plan of the central government to
increase its efficiency and effectiveness. Underlying is the expectation of synergies
and therefore cost savings. The realisation of synergies is based on the observation
that the two merging organisations both fit into the traditional model of a front,
middle and back office. The already close collaboration can be further improved when
located in the same office. Furthermore, being part of a larger institution enables the
dsta to utilise the central facilities of the Ministry of Finance.
In addition to the aforementioned cost savings it is expected that the physical
presence of the dsta within the Ministry will stimulate knowledge spill-overs to and
from the rest of the Ministry of Finance and other public entities. For instance, the
dsta has an important advisory function toward the rest of the Ministry, especially at
this juncture of financial instability. The trend of recent years – in which the dsta
played an important advisory role as an execution office for other central government
agencies – will be continued. The Box will explain this in more detail.

Box 6 – The DSTA as an execution office

·

healthy budgetary starting position in the new set-up. For now, the dsta helps the
Ministry of Internal Affairs with the design of the programme; once t-bonds and
t-bills issued by the Antilles will have been taken over by the State, the dsta will
include them in its regular debt management.
In October 2008, the State of the Netherlands implemented the 200 bln guarantee
scheme for the issuance of medium term bank debt. The dsta is responsible for
the execution of the scheme. This means that the dsta will receive the applications,
assess them (in cooperation with the Dutch Central Bank), perform the
administration and assign the applicable fees. Guaranteed loans will be published
on the website of the dsta. The window for the application process will remain
open until the end of 2009.

Cash Management within the new DSTA
Most notable about the new dsta will be that all functions related to cash
management of the central government will be consolidated into one organisation.
The current Cash Management Division (cmd) is the central treasury for all spending
departments, social security funds and a large number of (semi) public organisations.
Most of these public organisations have a decentralised public responsibility for the
execution of tasks assigned to them by law or otherwise. A number of schools and
police regions also choose to participate in the central treasury, on a voluntary
basis. All entities participating are independent in the execution of their (legal)
responsibilities, with the exception of their treasury functions. They are obliged to
hold their current accounts at the Ministry of Finance. They also have the possibility
to put money on deposits at the Ministry of Finance and to borrow for investments.
All organisations still have their current accounts at commercial banks, but only for
the execution of their payment transactions. At the end of every day, all current
accounts at commercial banks are pooled and regulated (that is: brought to zero).
As a result, no money is held overnight at commercial banks. On a daily basis, all
current accounts are cleared into the dsta’s single treasury account at the central
bank. This bundling avoids simultaneous borrowing and lending within the central
government. The dsta’s account at the central bank is what the dealers have to deal
with on the money market, either by borrowing or lending. At the end of the day,
dsta transactions bring the Treasury account at the central bank to a level between

43
The dsta: Move and Merger

Over the last couple of years, the dsta has been operating more and more as an
execution office for other parts of the government. As such, the knowledge and
infrastructure of the dsta have been put to use for the benefit of other government
entities. This box provides a number of examples.
· In close cooperation with the department responsible of the export insurance
scheme, the dsta has concluded credit default swaps (cdss) on Indonesia. Over the
last two years, the € 210 million of protection has been bought via banks from private
counterparts. This protection facilitated extra export to Indonesia, because limits
on the existing exposure to Indonesia had been reached. The dsta has been able to
execute these (adjusted) cds’s in a cost-effective way, meaning that the costs have
been fully covered by the premiums which the Netherlands has received from
exporters.
· The dsta is preparing auctions of carbon rights. In 2008, the dsta has started a tender
process regarding the carbon dealership. Because of internal and external factors,
the allocation of carbon rights in the Netherlands has been delayed. Therefore, the
tender procedure has been temporarily put on hold until more clarity exists on the
allocation of rights.
· The dsta assists in the debt relief programme for the Netherlands Antilles. In the
context of reforming the constitutional relations within the Kingdom of the
Netherlands, the Netherlands Antilles are granted debt relief to guarantee them a

H 0 and H 50 mln. The cmd employees responsible for estimating cash flows to and
from the central government update their estimates continuously to ensure that
funding by the dealers is as precise as possible (avoiding excess lending and
borrowing).
4.2 Organisational structure
Although the move and merger constitute a large organisational change, many things
will remain the same. The dsta will remain to conduct its businesses at arms length
and no changes are foreseen in its communication policies. Transparency and
predictability continue to be cornerstones of the dsta’s policies. The dsta’s website
will be restyled and the cash management part will be added, but the web address –
www.dsta.nl – stays the same.

The dsta: Move and Merger

44

The organisation will be built around a separation of responsibilities, in line with
the best practices of debt management offices (as described by the oecd and imf).
The dsta will be organised in three divisions and two supporting units.
Organisational chart DSTA

Agent
Erik Wilders
+31 (0)70 342 80 11
e.wilders@minfin.nl
Deputy Agent
Jan Hamers
+31 (0)70 342 80 08
j.t.m.hamers@minfin.nl
IT Unit
+31 (0)70 342 86 89

Secretariat
+31 (0)70 342 80 06

Cash Management, Issuance & Trading
Peter Nijsse
+31 (0)70 342 40 81
p.a.nijsse@minfin.nl

Policy & Risk Management
Niek Nahuis
+31 (0)70 342 80 03
n.j.nahuis@minfin.nl

Treasury & Debt Operations
Martin de Graaf
+31 (0)70 342 80 27
m.graaf@minfin.nl

The dsta remains part of the Treasury directorate of the Ministry of Finance. The
director – the Agent – will head the new dsta. He is responsible for the policies and
operations of the agency. The management team will consist of the agent, the deputy
agent and the 3 heads of division. The general management will be supported by a
secretariat of two and an ict-unit supporting the ict-infrastructure. The total head
count will be approx. 58 employees.
Introducing the body parts of the agency
The division Cash Management, Issuance and Trading (cmit), is the heart of the
agency (the front office). It includes the dealingroom. The division is responsible for
debt management operations, such as organizing dsl and dtc auctions, the daily
funding of the cash balance and the transactions on the eonia and euribor swap
markets. Furthermore, this division is the service centre for (semi) public
organisations that participate in the central treasury (as described above). Every
organisation has an account manager at cmit, available for information on for
instance deposit rates and loan structures. In addition to this, cmit is responsible

for tendering of the payment structure of the entire central government. Last but not
least, this division is the primary source of information on capital and money markets
for other parts of the Ministry and the political leadership. Especially during (recent)
crisis times, the information channels from the dealingroom – the eyes and ears –
have proven very valuable for assessing developments and for interpreting events.

The division Treasury & Debt Operations (tdo) can be seen as the hands of the dsta
(the back-office). In the end, the majority of the activities result in transactions and
financial flows. Among the many tasks are clearing & settlement, registration,
bookkeeping and monitoring risks (f.i. credit ratings, vars). It is the responsibility of
tdo to process all data into the ict-systems with adequate checks and balances, to
draft the borrowing conditions for dsls and dtcs and to provide management with
all relevant information on debt, cash flows and risks. Being one of the most
creditworthy countries in the world is not only about macro economic issues, but also
depends on being a reliable counterparty in its daily operations, for instance by
ensuring the timely payment of interest and principals. tdo also regulates and
predicts the cash balance of the central government.

45
The dsta: Move and Merger

Policy and Risk Management (prm) is the brains of the dsta. This division
formulates the policy framework and guidelines for the agency on all topics that are
relevant for an efficiently operating dmo. Topics include among others the desirable
risk profile of the debt portfolio, credit risk management, issuance and funding
strategies and the payment infrastructure. An important task for prm is its
responsibility for all external communication. This includes informing investors and
the market at large via publications such as this Outlook, Quarterly Outlooks, press
releases and the website. The Budget on National Debt is the document through
which the dsta is accountable to parliament.

The dsta: Move and Merger

46

47
Statistical information

Statistical information

1 Interest costs of central government debt

48

In millions of euros

Statistical information

The cut-off date for data in the Statistical Appendix is 14 November 2008 (unless otherwise specified)

Interest paid

2007

2008

2009

Interest cost on fixed debt

8,093

8,369

8,306

Interest cost on floating debt
(dtc, cp, and other short-term borrowing)

1,246

1,430

1,720

Buyback premium

2

0

0

Total interest cost

9,341

9,799

10,026

Interest received
Received interest on floating debt
(including central bank account)

128

87

49

Net interest received on euribor swaps

109

88

154

Net interest received on eonia swaps

10

0

0

Total interest received

247

175

203

Net interest cost

9,094

9,624

9,823

Net interest cost, in % gdp

1.6%

1.6%

1.6%

Interest costs in 2007 are realised costs.
The results for 2008 are preliminary and based on the 2009 Budget Memorandum
(September 2008).
Projections for 2009 are also based on the 2009 Budget Memorandum.
The 2009 Budget Memorandum is the latest forecast available at the cut-off date;
as a result, the effect of government measures in response to the financial market
crisis could not yet be included.

2 Changes in long-term debt in 2008

In thousands of euros

49

192.238.839

New issues in 2008		
Public bonds
Private placements

26,732,980
3,569
add

26,736,549

Redemptions in 2008		
Regular redemptions
Public bonds
Private placements

21,340,031
7,719

Early redemptions
Public bonds

3,276

Private placements

18,950
less

Position as at 14 November 2008

21,369,976
197,605,412

Statistical information

Position as at 31 December 2007		

3 Issuance of bonds for the 2007 and 2008 borrowing
requirement

Statistical information

50

In billions of euros

Month of				
issuance
ISIN-code
Bond issued
Issue

Raised
amount

Yield

2007					
January

NL0000102234

4% neth 2005 due 15 January 2037

reopening

1.5

4.13%

March

NL0000101707

2.75% neth 2006 due 15 April 2009

reopening

3.3

3.91%

May

NL0000102234

4% neth 2005 due 15 January 2037

reopening

2.8

4.40%

June

NL0000102671

5% neth 2007 due 15 July 2012

reopening

1.9

4.56%

July

NL0006007239

4.5% neth 2007 due 15 July 2017

first issuance

6.1

4.60%

September

NL0006007239

4.5% neth 2007 due 15 July 2017

reopening

3.5

4.24%

November

NL0006007239

4.5% neth 2007 due 15 July 2017

reopening

2.6

4.22%

Total

21.6

2008					
January

NL0006173015

4% neth 2008 due 15 January 2011

first issuance

3.2

February

NL0006227316

4% neth 2008 due 15 July 2018

first issuance

6.6

3.93%
4.19%

April

NL0006173015

4% neth 2008 due 15 January 2011

reopening

3.2

3.76%

June

NL0006227316

4% neth 2008 due 15 July 2018

reopening

2.0

4.73%

July

NL0006173015

4% neth 2008 due 15 January 2011

reopening

2.0

4.46%

September

NL0006227316

4% neth 2008 due 15 July 2018

reopening

2.1

4.31%

November

NL0000102101

2.75% neth 2003 due 15 January 2009

reopening

0.2

3.00%

NL0000101707

2.75% neth 2006 due 15 April 2009

reopening

0.6

2.89%

NL0000102416

3.75% neth 1999 due 15 July 2009

reopening

1.8

2.82%

NL0006173015

4% neth 2008 due 15 January 2011

reopening

4.6

2.94%

Total

26.3

4 Concluded interest rate swaps

Position as at 14 November 2008, in millions of euros

Net nominal
amount

Pay or receive*
(net)

2008

3,647

2009

2,104

receive
receive

2010

7,479

pay

2011

5,064

pay

2012

17,387

pay

2013

17,549

pay

2014

18,392

pay

2015

16,708

pay

2016

10,095

receive

2017

14,675

receive

2018

10,724

receive

2019

58

receive

2020

53

receive

2021

3,531

receive

2022

6,571

receive

2023

350

receive

2026

1,910

receive

2027

8,500

receive

2028

450

receive

2032

16

receive

2035

6,010

receive

2036

2,075

receive

2037

4,695

receive

2055

33

receive

Net total

7,082

pay

* Receiver swaps are swap contracts in which the Dutch State receives
a long-term fixed interest rate and pays a short-term floating interest rate.
Payer swaps are swap contracts in which the Dutch State pays a long-term
fixed interest rate and receives a short-term floating interest rate.

Statistical information

Bucket
(year of maturity)

51

52

In millions of euros

Statistical information

5 Results of the money market benchmark

Results eonia-benchmark

2002

2003

2004

2005

2006

2007

accumulated

compared to funding before 2002

29.6

17.0

-2.6

-17.3

-25.6

-9.1

-8.0

Outperformance of the benchmark

2.7

11.9

8.2

12.0

21.0

30.4

86.2

Total result

32.3

28.9

5.6

-5.3

-5.6

21.3

77.2

6 Key figures of individual bonds in 2008

In thousands of euros

53

Total			
31-12-2007
Issues
Redemptions

Total
14-11-2008

ISIN-code

A. Public Bonds					
2.50 pct dsl 2005 due 15 January 2008

10,222,000

10,222,000

0

5.25 pct DSL 1998 due 15 July 2008

11,118,031

11,118,031

0

NL0000102291

2.75 pct dsl 2003 due 15 January 2009

10,366,430

190,000

10,556,430

NL0000102101

2.75 pct dsl 2006 due 15 April 2009

10,776,000

570,000

11,346,000

NL0000101707

3.75 pct dsl 1999 due 15 July 2009

11,063,000

1,830,000

12,893,000

NL0000102416

3.00 pct dsl 2004 due 15 January 2010

12,121,486

12,121,486

NL0000102309

7.50 pct dsl 1995 due 15 April 2010

529,504

5.50 pct dsl 2000 due 15 July 2010

10,227,366

4.00 pct dsl 2008 due 15 January 2011

0

2,454
13,010,000

NL0000102150

527,051

NL0000102192

10,227,366

NL0000102580

13,010,000

NL0006173015

5.00 pct dsl 2001 due 15 July 2011

12,455,000

12,455,000

NL0000102606

5.00 pct dsl 2002 due 15 July 2012

12,427,000

12,427,000

NL0000102671
NL0000102689

4.25 pct dsl 2003 due 15 July 2013

12,433,000

12,433,000

3.75 pct dsl 2004 due 15 July 2014

11,709,846

11,709,846

NL0000102325

3.25 pct dsl 2005 due 15 July 2015

10,083,765

10,083,765

NL0000102242

4.00 pct dsl 2006 due 15 July 2016

10,045,467

10,045,467

NL0000102283

4.50 pct dsl 2007 due 15 July 2017

12,154,990

12,154,990

NL0006007239

4.00 pct dsl 2008 due 15 July 2018

0

10,667,020

NL0006227316

7,084,810

NL0000102275

4,994,679

NL0000102077

3.75 pct dsl 2006 due 15 January 2023*

6,618,850

7.50 pct dsl 1993 due 15 January 2023*

5.460,639

5.50 pct dsl 1998 due 15 January 2028

8,886,814

8,886,814

NL0000102317

4.00 pct dsl 2005 due 15 January 2037
2 1/2 pct Inscription register

12,043,427

12,043,427

NL0000102234

20,545

NL0000006286

3 1/2 pct Inscription register
3 pct Inscription register

465,960

10,667,020

465,960

21,097

553

364
8,359
190,772,437

26,732,980

364

NL0000002707

269

8,090

NL0000004802

21,809,267

195,696,150

* The issues and redemptions mentioned are the result of the conversion of the 7.5% to the 3.75% bond.

Statistical information

Movements in 2008

Summary

Statistical information

54

In thousands of euros

Movements in 2008
Total
Issues
Redemptions
31-12-2007			

Total
14-11-2008

A Public Bonds
Total public bonds

190,772,437

26,732,980

21,809,267

195,696,150

1,466,402

3,569

26,669

1,443,302

192,238,839

26,736,549

21,835,936

197,139,452

B Private placements
Total private placements
Total

7 Annual interest payments and repayments of principal,
2008-2037

In millions of euros, according to the long-term debt position as at 14-11-2008

Redemptions

36

5

2009

8.276

34.833

2010

7.181

22.908

2011

6.213

25.625

2012

5.058

12.753

2013

4.411

12.590

2014

3.871

11.748

2015

3.429

10.126

2016

3.098

10.095

2017

2.693

12.444

2018

2.123

10.724

2019

1.692

57

2020

1.688

52

2021

1.684

38

2022

1.682

71

2023

1.677

12.086

2024

973

0

2025

973

29

2026

972

0

2027

972

2

2028

972

8.887

2029

483

0

2030

483

0

2031

483

0

2032

483

16

2033

482

0

2034

482

0

2035

482

0

2036

482

0

2037

482

12.043

Statistical information

Interest payments
17-11 to
31-12-2008

55

Statistical information

56

57
Statistical information

Dutch State Treasury Agency buildings

page 2
Herengracht 342-344
Amsterdam
Fromer orphanage ‘De Oranje Appel’

page 6, 7
Herengracht 380
Amsterdam
Built in 1888
Architect: Gerlof Bartholomeus Salm

page 32
Herengracht 342-344
Amsterdam
Built in 1720
Fromer house of parson Ferdinand
Domela Nieuwenhuis

page 33
Oude Turfmarkt 127
Amsterdam
Built in 1868
Architect: Willem Anthonie Froger
Former headquarter of De Nederlandsche
Bank

The cut-off date for data in the Outlook 2009 is
14 November 2008 (unless otherwise specified)
Colophon
Design Studio Tint, The Hague
Photography Kelle Schouten, Stompwijk
Printing Drukkerij van Deventer, ’s-Gravenzande
issn 1566-0591
001dec2008

page 16
Korte Spinhuissteeg 3
Amsterdam
Built in 1645
Former penitentiary  for women

page 38, 39
Orlyplein 32
Amsterdam
Built in 1992
Architect: ags Architecten &
Planners b.v.

page 17
Herengracht 410-412
Amsterdam
Built in 1644
Architect: Philips Vingboons

page 46, 47, 57
Korte Voorhout 7
Den Haag
Built in 1975
Architect: Jo Vegter and Mart Bolten
Renovated 2006-2008
Architect: Meyer en Van Schooten
Architecten

Highlights of the DSTA Outlook 2009
•
•
•
•
•
•
•
•
•
•
•
•
•
•

Targeted capital market funding in 2009: € 48 bln.
Expected money market volume at year end 2009: € 28 bln.
During the year, the borrowing requirement will be updated regularly.
DSLs: new 3-year, new 5-year, and new 10-year.
In January 2009: launch of the new 3 year DSL through tap.
Dutch Direct Auction (DDA) for new 10-year DSL in February 2009.
Later in 2009: DDA for the new 5-year.
One reopening of the DSL 15 January 2028.
New: reopening facility for off-the-run DSLs.
DSL auctions: on average twice a month, on the 2nd Tuesday (regular auction)
and on 4th Tuesday (for off-the-runs).
DTC auctions: 24 in total, on every 1st and 3rd Monday.
Quarterly issuance calendars published in March, June and September.
Commercial Paper in euros and foreign currencies is a full-fledged money
market instrument for maturities up to 3 months.
A strong group of 13 PDs and 3 SMSs guarantees liquidity and price
transparency of DSLs and DTCs.

Contacts
Agent
Erik Wilders
+31 (0)70 342 80 11
e.wilders@minfin.nl
Deputy Agent
Jan Hamers
+31 (0)70 342 80 08
j.t.m.hamers@minfin.nl
IT Unit
+31 (0)70 342 86 89

Secretariat
+31 (0)70 342 80 06

Cash Management, Issuance & Trading
Peter Nijsse
+31 (0)70 342 40 81
p.a.nijsse@minfin.nl

Policy & Risk Management
Niek Nahuis
+31 (0)70 342 80 03
n.j.nahuis@minfin.nl

Treasury & Debt Operations
Martin de Graaf
+31 (0)70 342 80 27
m.graaf@minfin.nl

DSL calendar 2009
Regular auction

Off-the run facility

Month of issue

Auction date (2nd Tuesday)              details

Auction date (4th Tuesday)**

January

13

tap NEW 3-year

27

February

*

DDA 10-year

24

March

10

reopening 3-year

24

April

14

tap

28

May

12

tap

26

June

9

tap

23

July

14

tap

28

no auction

no auction

August
September

8

tap

22

October

13

tap

27

November

10

tap

24

December

8

tap

22

* Date for the dda is to be determined
** Action dates will be used as long as the total target volume has not yet been reached.
Announcement for all auctions is at t-6 (Wednesday prior to the auction)
Settlement is t+3 (Friday following the auction)

DTC calendar 2009

Date
auction

Date
settlement

DTC
3-month

05-01-09

07-01-09

31-03-09

19-01-09

21-01-09

30-04-09

02-02-09

04-02-09

30-04-09

16-02-09

18-02-09

29-05-09

02-03-09

04-03-09

29-05-09

31-08-09

16-03-09

18-03-09

30-06-09

30-09-09

06-04-09

08-04-09

30-06-09

20-04-09

22-04-09

31-07-09

04-05-09

06-05-09

31-07-09

18-05-09

20-05-09

31-08-09

02-06-09 *

04-06-09

31-08-09

30-11-09

15-06-09

17-06-09

30-09-09

31-12-09

06-07-09

08-07-09

30-09-09

20-07-09

22-07-09

30-10-09

03-08-09

05-08-09

30-10-09

17-08-09

19-08-09

30-11-09

07-09-09

09-09-09

30-11-09

26-02-10

21-09-09

23-09-09

31-12-09

31-03-10

05-10-09

07-10-09

31-12-09

19-10-09

21-10-09

29-01-10

02-11-09

04-11-09

29-01-10

16-11-09

18-11-09

26-02-10

07-12-09

09-12-09

26-02-10

31-05-10

21-12-09

23-12-09

31-03-10

30-06-10

* Tuesday
Shaded areas indicate new programmes

DTC
6-month

DTC
9-month

DTC
12-month
31-12-09

30-09-09
31-07-09
31-12-09

31-03-10
31-12-09
30-10-09
31-03-10

30-06-10
31-03-10
29-01-10
30-06-10

30-09-10
30-06-10
30-04-10
30-09-10

Dutch State Treasury Agency
Ministry of Finance
p.o. Box 20201
2500 ee The Hague
The Netherlands
Website: www.dsta.nl