Arab Today, arab today global governments face rising debt costs as bonds fall
Last Updated : GMT 00:13:22
Arab Today, arab today
Arab Today, arab today

Global governments face rising debt costs as bonds fall

Arab Today, arab today

Arab Today, arab today Global governments face rising debt costs as bonds fall

Paris - AFP

Governments face a rise in their borrowing costs due to the winding down of monetary stimulus programmes and as investors bet on central banks hiking interest rates sooner than promised. Moody\'s Analytics warned this week that \"US rates could rise as the Fed moves to slow its purchases of long-term debt, which in turn could push up the yields on European government bonds.\" That has already begun. The yield on the debt of the United States and top European countries, as well as emerging economies, has risen recently as investors bet that the US Federal Reserve could begin as soon as in September to lower the amount of monetary stimulus it injects into the economy. The $85 billion (64 billion euros) per month that the Fed has ploughed into the US economy led to lower bond yields in the United States, as well in many other countries as easy money went abroad from the United States in search of somewhat higher risk and yields elsewhere. But recently, investors have factored in the prospect of the easy money tap being slowly closed down. This has pushed up yields on US Treasury bonds, and has caused some of the money placed abroad to be withdrawn, pushing up sovereign bond yields elsewhere. The rate of return for investors on 10-year US Treasuries rose to 2-year highs this past week, implying a more than 50 percent increase in US borrowing costs since the beginning of the year. On Friday, 10-year Treasuries were trading at 2.812 percent, up from 2.689 percent at the beginning of the month and 1.828 percent at the beginning of the year. Ten-year British gilts were at 2.704 percent Friday, up from 2.401 percent at the beginning of August and 1.990 percent at the beginning of the year. At the height of the eurozone debt crisis, some eurozone money flowed into less risky bonds, such as French debt. But as the debt crisis eases, bond yields for the countries in trouble have fallen and there are signs that yields on the safe haven countries may rise, with French bonds being closely watched. For Germany, the yield on 10-year Bunds was 1.881 percent on Friday, up from 1.667 percent at the beginning of the month and 1.442 percent at the beginning of 2013. France\'s 10-year bonds yielded 2.400 percent Friday, up from 2.223 percent at the beginning of August and 2.077 percent at the beginning of the year. The drop in sovereign bond yields to exceptionally low levels, thanks to the ultra-low interest rates set by central banks and huge monetary stimulus programmes, have masked the debt problems the countries face. Now their governments face having to pay more to finance new debt as their borrowing costs rise in line with the yields on the secondary market where debt issued previously is traded. The rise in sovereign yields has come even though central banks have pledged to keep those near-zero rates for the foreseeable future. Bond analyst Rene Defossez at French investment bank Natixis said investors are starting to bet that the signs of economic recovery which justify the winding down of stimulus may induce central banks to raise rates sooner than they suggest. \"The factors which are pushing yields higher are tending to prevail\" over the interest rate guidance issued by central banks. This was particularly marked in Britain this week as the minutes from the last policy meeting of the Bank of England revealed some disagreement over its forward guidance. And there has been an unexpectedly strong rebound by European economies in the second quarter -- 0.6 percent in Britain, 0.7 percent in Germany and 0.5 percent in France even though analysts warn that in France a big factor was bad weather and consumption of energy for heating. \"The prolonged period of exceptionally loose monetary conditions in the UK and other parts of the developed world is on borrowed time,\" analysts at London-based Capital Economics said this past week. \"We therefore think that real long-term yields are likely to drift up over the next few years as the monetary screws are slowly tightened.\" This is encouraging those who hold long-term bonds to sell while bond prices are still relatively high. Bond prices and yields move inversely. Those investors who bought bonds in the past couple of years when yields have been low acquired them at a high price. Thus the expectation that yields will rise means the price of bonds will fall. In historical terms, the current price of bonds of the major countries is \"very, very expensive\", according to Defossez. \"The potential for the price of the Bund to fall is colossal,\" he said. Another factor likely to bear on investment decisions is relative changes in exchange rates which are highly sensitive to interest rates, and to the size and cost of national debt. The prospect of outflows of capital because of US policy have pushed the Indian currency down sharply in recent days.  

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today global governments face rising debt costs as bonds fall Arab Today, arab today global governments face rising debt costs as bonds fall

 



Arab Today, arab today
Arab Today, arab today Fadi explains secrets of  Nancy Ajram's newlook

GMT 18:23 2017 Friday ,24 February

Fadi explains secrets of  Nancy Ajram's newlook
Arab Today, arab today Tourist guide explains types of tourism

GMT 18:28 2017 Saturday ,25 February

Tourist guide explains types of tourism
Arab Today, arab today Expresses Algerian history by woody figures

GMT 13:26 2017 Friday ,24 February

Expresses Algerian history by woody figures
Arab Today, arab today Iran complying with nuclear deal

GMT 07:14 2017 Saturday ,25 February

Iran complying with nuclear deal
Arab Today, arab today Zainab al-Maliki reveals herTV presenter models

GMT 18:12 2017 Friday ,24 February

Zainab al-Maliki reveals herTV presenter models
View News in Arabic - Business: مصارف
Arab Today, arab today
Arab Today, arab today
Arab Today, arab today Reading therapy relieves mental disorders

GMT 15:39 2017 Friday ,24 February

Reading therapy relieves mental disorders
Arab Today, arab today UK appoints 1st Scotland Yard chief in 188 years

GMT 05:14 2017 Thursday ,23 February

UK appoints 1st Scotland Yard chief in 188 years
Arab Today, arab today Penguins in the age of dinos

GMT 11:44 2017 Saturday ,25 February

Penguins in the age of dinos
Arab Today, arab today Pluto's unruly moons

GMT 06:31 2015 Thursday ,04 June

Pluto's unruly moons
Arab Today, arab today 'Constructive' Vauxhall talk with union

GMT 08:54 2017 Saturday ,25 February

'Constructive' Vauxhall talk with union
Arab Today, arab today Tesla back into red but revenue grows

GMT 07:27 2017 Thursday ,23 February

Tesla back into red but revenue grows
Arab Today, arab today Actress Lobna Abdel Aziz proud of her career

GMT 06:08 2017 Thursday ,23 February

Actress Lobna Abdel Aziz proud of her career
Arab Today, arab today Ex-yoga missionary unleashes rage

GMT 12:16 2017 Thursday ,23 February

Ex-yoga missionary unleashes rage

GMT 07:36 2017 Wednesday ,22 February

Wafaa Amer is happy for Sherihan’s return

GMT 12:35 2017 Tuesday ,21 February

63-Year-Old Woman Delivers Baby

GMT 22:42 2017 Thursday ,23 February

Nasima Gamei revives heritage in jewelries

GMT 10:28 2017 Wednesday ,22 February

Milan laughs while Rome cries

GMT 20:33 2017 Friday ,17 February

To release new antiques collection

GMT 10:20 2017 Thursday ,23 February

Brazil's top diplomat resigns

GMT 11:54 2017 Thursday ,23 February

Saudis await visitors but will they come?

GMT 13:12 2015 Saturday ,09 May

Sheikh Sultan opens Sharjah Centre

GMT 20:02 2017 Tuesday ,21 February

Nohan Seyam designs beautiful accessories
Arab Today, arab today
Arab Today, arab today
 
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube
arabstoday arabstoday arabstoday arabstoday
arabstoday arabstoday arabstoday
arabstoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabstoday, Arabstoday, Arabstoday