Home' Trinidad and Tobago Guardian : January 7th 2016 Contents BG22 INTERNATIONAL
BUSINESS GUARDIAN www.guardian.co.tt JANUARY 7 • 2016
The amount of debt that the
governments of the world s
leading economies will need
to refinance in 2016 will be
little changed from last year
as nations make strides in cut-
ting budget deficits to a third of the highs
seen during the financial crisis.
The value of bills, notes and bonds coming
due for the Group-of-Seven nations plus Brazil,
China, India and Russia will total US$7.1 trillion,
compared with US$7 trillion in 2015 and down
from US$7.6 trillion in 2012. Japan, Germany,
Italy and Canada will all see redemptions fall,
while the US, China and the UK face increases,
data compiled by Bloomberg show.
The amount of maturing debt has gradually
fallen since Bloomberg began collating the
data in 2012.
The decline may bring some support to the
bond market as the US. Federal Reserve grad-
ually raises interest rates, pushing yields up
from record lows.
Budget deficits are forecast by economists
to narrow for a seventh straight year in 2016
as governments extend the maturity of their
outstanding debt and continue to cut back on
the extra spending put in place to combat the
global financial meltdown.
"Most of these countries are moving toward
fiscal discipline," said Mohit Kumar, head of
rates strategy at Credit Agricole SA s corporate
and investment-banking unit in London.
"There was fiscal expansion during the crisis
for various reasons: to support growth and to
shift liabilities from the private sector into the
public sector. Those effects are going away."
While the decline shows there s less pressure
on governments to borrow, it doesn t neces-
sarily mean they will issue less; that depends
on their overall funding requirements.
Germany plans to boost its bond and bill
sales to 203 billion euros (US$221 billion) this
year from about 175 billion euros in 2015, partly
to finance expenses caused by a record influx
Russia and Brazil will see the biggest pro-
portional declines in debt redemptions, with
securities coming due tumbling by 38 per cent
and 26 per cent, data compiled by Bloomberg
show. Including interest payments, the amount
of debt that needs to be refinanced by the G-
7 and BRIC nations will total US$7.8 trillion
this year, also little changed from 2015.
Government bonds eked out a 1.2 per cent
gain for investors in 2015, compared with 8.4
per cent in 2014 and an average 4.4 per cent
return over the past five years, according to
Bank of America Merrill Lynch indices.
Yields, which move inversely to prices, are
now starting to rise as the fallout from recession
fades, reducing demand for the securities as
a haven, and as the US central bank predicts
four rate increases before the year is out.
US 10-year Treasury yields will climb to
2.75 per cent by the end of 2016, according
to the median forecast of 65 analysts surveyed
by Bloomberg, from 2.23 per cent as of 7:45
am in New York.
This may prompt investors to demand more
compensation to hold other bonds, too, includ-
ing those from countries such as Germany
and Japan, where yields are currently being
kept down by their central banks expanding
the money supply through debt purchases.
The average sovereign yield in Bank of Amer-
ica Merrill Lynch s Global Government Index
climbed to 1.1 per cent, from an all-time low
of 0.82 per cent reached in January last year.
"Yields will rise and the Fed s tightening
will spill over into other bonds," said David
Schnautz, a London-based fixed-income
strategist at Commerzbank AG in London.
"At least the reduced pressure to borrow
will be a nice offsetting factor. There s also a
lot of structural demand out there still and
that will limit the upside for bond yields."
In the US, the world s largest debtor nation
with US$13.1 trillion of marketable debt obli-
gations, the amount of government securities
coming due will rise 14 per cent from last year
to US$3.5 trillion, according to data compiled
by Bloomberg. China faces the biggest per-
centage increase in refinancing needs in 2016,
with a 41 per cent jump to US$254 billion.
The drop in bond redemptions across most
of the world s leading economies, plus quan-
titative-easing programs and subdued inflation,
will continue to underpin demand for gov-
ernment bonds, even as higher US interest
rates put upward pressure on yields, according
to Rabobank International.
Slower inflation boosts the appeal of the
fixed payments that bonds offer. Economists
surveyed by Bloomberg estimate consumer
prices in developed countries rose just 0.5 per
cent in 2015, a fraction of the 3.5 per cent
increase in 2008.
Budget deficits across the developed world
will shrink to an average 2.4 per cent of gross
domestic product this year, economists predict,
from an estimated 2.6 per cent in 2015 and
a peak of 7.2 per cent in 2009.
"The economic and policy backdrop is pos-
itive" for government bonds, said Lyn Gra-
ham-Taylor, a rates strategist at Rabobank in
London. "We remain bullish."
Above is a table of projected bond and bill
redemptions and interest payments for the G-
7 and BRIC countries in 2016, using data com-
piled by Bloomberg as of December 31 (in billions
face US$7 trillion debt
refinancing tab in 2016
Links Archive January 6th 2016 January 8th 2016 Navigation Previous Page Next Page