Key Dutch interest rate hits new low

A key Dutch interest rate dropped with the ECB beginning a round of quantitative easing. The rate on Dutch obligations fell to 0.32 percent from 0.35 percent as of yesterday.

The ten-year bond rate slid as the European Central Bank proceeds with purchases of government obligations as a part of its quantitative easing programme. QE is aimed at injecting additional liquidity into the Euro Zone economies, some of which have been experiencing negative price growth.

The purchase of government bonds increases their price through an upward demand pressure and, conversely, reduces the yield received by the bondholder.

Dutch interest rates are falling alongside those of the other Euro Zone countries, whose government obligations are being purchased. The lowest interest rate is currently paid on  German debt, with a yield of just 0.27 percent.

Such low interest rates on government bonds imply that countries can obtain loans at relatively low costs. This is a subject of concern amongst some officials of the Euro area, since it may promote highly indebted counties to assume further debt and postpone reform.

 

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