High profits on bonds

25/11/2010 15:00

In the first nine months of 2010, the value of bonds increased by more than 23 billion euro. In this period, the value of newly issued bonds minus paid-off bonds was 27 billion euro. The overall value of bonds quoted on the Amsterdam Stock Exchange rose by 50 billion euro to 883 billion euro.

Higher profits as a result of lower interest rate

The capital market interest rate dropped from 3.55 to 2.50 percent in the first nine months of 2010. Government bonds generated high profits. Altogether, the value of government bonds increased by more than 12 billion euro, i.e. 5.5 percent of the quoted value at the end of 2009. 

The return on bonds issued by financial institutions was more than 2 percent lower. Due to the insecurity, which still dominates the financial markets, most investors opted for the relative safety of government bonds. The return on all bonds issued at the Amsterdam Stock Exchange was nearly 3 percent of the quoted value at the end of 2009.

Return on bonds

Return on bonds

Low interest rate good for Dutch government coffers

The Dutch government coffers benefit from the lower interest rate. The government has to pay less interest to finance the public debt. In the first nine months of 2010, the government issued bonds to the amount of 47 billion euro with an average interest rate of 2.35 percent.

Over the same period in 2009, the average interest rate on bonds was 3.07 percent. The interest rate of bonds issued by the Dutch government is the lowest in Europe, save for Germany (2.3 percent). With 11.3 percent, Greece pays the highest rate of all European countries.

Value of bonds quoted on the Amsterdam Stock Exchange

Value of bonds quoted on the Amsterdam Stock Exchange

Majority of bonds issued by financial institutions

The value of bonds increased by more than 50 billion euro in the first three quarters of 2010; government bonds accounted for 30 billion euro. Despite the considerable increase, the total value of government bonds (305 billion euro) is still lower than the value of bonds issued by the financial sector. At the end of September 2010, the total value of quoted bonds issued by financial institutions exceeded 544 billion euro.

Jos van Heiningen