The Dutch State Treasury Agency could start issuing ultra-short-dated paper to reduce funding costs. The DSTA borrows €2-3 billion a day in the interbank deposit market and is looking to diversify its funding options.
"We are just one of many institutions looking for funds in the overnight market and don't have the opportunity to differentiate ourselves on the basis of our credit quality in that market," said Ron Bruggink, head of money and capital markets. The borrower gets more credit as a triple-A in the bond market than the overnight market, he said.
Replacing borrowing in the interbank deposit market with issuance of one-day or one-week paper would reduce costs to below the Euro Overnight Index Average (Eonia) rate, anticipates Bruggink. The timeframe for the switch is still under review because the European commercial paper market does not yet offer all the features Bruggink requires. While the market is developing rapidly, it lacks the requisite liquidity and same-day settlement, for example, is not yet an option in most Eurozone countries.
The considered changes to funding come as Bruggink takes over as head of money and capital markets from Eric Wilders, who was recently promoted to head of agency when Leo Verwoerd retired.
