The international investor will not be surprised to hear that the Dutch bond market has been one of the star performers compared to other bond markets in recent years, measured in local currencies as well as in Deutschmarks. The continually low inflation, the absolute clarity with respect to monetary policy, the strong guilder and the political and social stability form the ingredients of one of the most attractive bond markets in the world.
In 1995 also, the Dutch bond market (incidentally the oldest bond market in the world) was one of the star performers. According to the EFFAS methodology, the total return (measured in Deutschmarks) for a bond portfolio with maturities longer than 1 year amounted to 18.1%.
Although we are not yet half way through 1996, it is already certain that the fixed income investor will not be heading for a fantastic year, certainly when compared to 1995. Investors and analysts are even asking themselves apprehensively whether history (1994) will repeat itself. We do not share this opinion. The differences with 1994 are so great that an increase of the 10-year bond yields to more than 7% appears to be quite out of the question for the coming twelve months.
