global governments face rising debt costs as bonds fall
Last Updated : GMT 00:49:26
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 This has pushed up yields on US Treasury bonds, and has caused some of the money placed abroad to be withdrawn, pushing up sovereign bond yields elsewhere.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.  

arabstoday
arabstoday

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*

global governments face rising debt costs as bonds fall global governments face rising debt costs as bonds fall

 



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*

global governments face rising debt costs as bonds fall global governments face rising debt costs as bonds fall

 



Arab Today, arab today
Arab Today, arab today Jordanian woman reveals her project

GMT 00:46 2017 Saturday ,11 November

Jordanian woman reveals her project
Arab Today, arab today Air China suspends flights to North Korea

GMT 10:39 2017 Thursday ,23 November

Air China suspends flights to North Korea
Arab Today, arab today Sophian Yussef reveals suitable decoration

GMT 02:56 2017 Thursday ,23 November

Sophian Yussef reveals suitable decoration
Arab Today, arab today Syria opposition meets in Riyadh

GMT 06:23 2017 Thursday ,23 November

Syria opposition meets in Riyadh
Arab Today, arab today Jordanian journalist happy of her career

GMT 17:37 2017 Thursday ,23 November

Jordanian journalist happy of her career
Arab Today, arab today
Arab Today, arab today
Arab Today, arab today Human form of 'mad cow' disease

GMT 00:11 2017 Friday ,24 November

Human form of 'mad cow' disease
Arab Today, arab today Srebrenica women cry tears of joy

GMT 08:03 2017 Thursday ,23 November

Srebrenica women cry tears of joy
Arab Today, arab today Delhi half-marathon to go ahead

GMT 03:51 2017 Saturday ,18 November

Delhi half-marathon to go ahead
Arab Today, arab today The history of solar eclipses

GMT 05:16 2017 Sunday ,20 August

The history of solar eclipses
Arab Today, arab today 'Robo-taxis' hold promise, and perils

GMT 08:07 2017 Thursday ,23 November

'Robo-taxis' hold promise, and perils
Arab Today, arab today Honda recalls 800,000 minivans

GMT 11:43 2017 Wednesday ,22 November

Honda recalls 800,000 minivans
Arab Today, arab today Abeer Sabry reveals reason of “The Flood” success

GMT 08:03 2017 Tuesday ,21 November

Abeer Sabry reveals reason of “The Flood” success
Arab Today, arab today paObama climate envoy slams Trump's rejection

GMT 16:04 2017 Friday ,17 November

paObama climate envoy slams Trump's rejection

GMT 07:56 2017 Monday ,20 November

Singer Jahda Wahba has unlimited ambitions

GMT 02:14 2017 Saturday ,18 November

May under Brexit pressure at EU reform summit

GMT 18:41 2017 Friday ,20 October

Designer Aql Faqih aspires to innovation

GMT 11:38 2017 Wednesday ,15 November

Unloved vultures fight for their survival

GMT 17:52 2017 Sunday ,03 September

Etiquette expert underlines importance of gifts

GMT 10:43 2017 Wednesday ,22 November

Cigar-shaped asteroid came

GMT 09:45 2017 Tuesday ,21 November

Visit Jamaica for more than just sun

GMT 17:12 2017 Monday ,07 August

Al-Shawaifi reveals secrets of total solar eclipse

GMT 16:53 2017 Tuesday ,05 September

Youssra depended on colored foam
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