Dutch government to cash in on ING bonds

[NEW YORK] The Dutch government's decision to hold on to US mortgage debt acquired during the 2009 bailout of ING Groep NV has paid off so far as prices of the securities soared, more than doubling in some cases from lows that year.

The nation now is planning to sell all US$12 billion of the bonds, many of which are tied to borrowers who were deemed more risky after failing to document their incomes or taking on mortgages with growing balances. ING, the Netherlands' biggest financial services company, said last week that the current market value of the bonds is about 71 per cent of the face amount. The government may see a gain of almost 800 million euros (S$1.3 billion), Finance Minister Jeroen Dijsselbloem told Parliament.

The pay-off for the Netherlands and the consequences for the US$800 billion market for US mortgage bonds without government backing will depend on how well it can unwind the bet with the help of BlackRock Inc. The sales, which require European Union approval, are targeted to be finished within the next year. Risks over that period include the forecasted reduction of the US Federal Reserve's unprecedented economic stimulus, potential continued sales of the debt by Fannie Mae and Freddie Mac, and the possibility of more budget battles underlying US lawmakers like the one that roiled global markets last month.