Dutch financial institutions, including banks and pension funds, recorded losses of €23bn on their foreign government bond holdings in the first half of 2025, according to new figures from De Nederlandsche Bank (DNB), which stated that rising interest rates in Europe drove the decline.

At the end of June, Dutch institutions held €531bn in foreign government bonds, including debt issued by federal states and local authorities, compared to €536bn at the close of 2024.

DNB said the fall was, in part, a result of price and exchange rate effects, with losses totalling €23bn, although this was partially offset by €18bn of new purchases in the first half of the year.

The largest purchases were of German (€11.5bn), Spanish (€1.7bn) and Indian (€1.7bn) government bonds.

However, the steepest declines in value were seen in German (-€5.4bn), French (-€2.4bn), and Austrian (-€1.6bn) bonds.

Indeed, with a third of Dutch holdings concentrated in French and German debt, the eurozone downturn weighed heavily on portfolios.

Outside Europe, government bonds recorded more positive price developments, led by the United States (+€1.8bn).

Mexico, Brazil, Ecuador and Thailand also saw gains, totalling €853m, while Poland was the only European country to post an increase, at €120m.

Despite these gains, DNB noted that non-European government bonds suffered an overall €14bn loss due to fluctuating exchange rates, with the weakening US dollar against the euro applying downward pressure.

It added that institutions can, however, mitigate such risks through derivatives, which rise in value when foreign currencies depreciate.

The regulator emphasised that the primary driver of the declines was rising interest rates, including those in Germany and France.

It also warned that Germany’s decision earlier this year to partially abandon its Schuldenbremse (debt brake), allowing greater borrowing, and France’s ongoing struggles with high national debt have both pushed yields higher.

As interest rates rise, the market value of previously issued tradable bonds falls, eroding the holdings of Dutch institutions.

The findings follow recent scrutiny of eurozone debt sustainability, as Germany has faced calls for deeper fiscal and pension reform, while Italy’s pension funds have also come under strain from sovereign bond volatility.

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