Leading nations face debts of $7.6tn this year

Wed, Jan 4, 2012, 00:00

GOVERNMENTS OF the world’s leading economies have more than $7.6 trillion of debt maturing this year, with most facing a rise in borrowing costs.

Led by Japan’s $3 trillion and the US’s $2.8 trillion, the amount coming due for the Group of Seven nations and Brazil, Russia, India and China is up from $7.4 trillion at this time last year, according to data compiled by Bloomberg.

Ten-year bond yields will be higher by year-end for at least seven of the countries, forecasts show. Investors may demand higher compensation to lend to countries that struggle to finance increasing debt burdens as the global economy slows.

The IMF cut its forecast for growth this year to 4 per cent from a prior estimate of 4.5 per cent as Europe’s debt crisis spreads, the US struggles to reduce a budget deficit exceeding $1 trillion and China’s property market cools.

The amount needing to be refinanced rises to more than $8 trillion when interest payments are included.

Coming after a year in which Standard and Poor’s cut the US rating to AA+ from AAA and put 15 European nations on notice for possible downgrades, the competition to find buyers is heating up.

While most of the world’s biggest debtors had little trouble financing their debt load in 2011, with Bank of America Merrill Lynch’s Global Sovereign Broad Market Plus Index gaining 6.1 percent, the most since 2008, that may change.

Italy auctioned €7 billion of debt last Thursday, less than the €8.5 billion targeted.

With an economy sinking into its fourth recession since 2001, prime minister Mario Monti’s government must refinance about $428 billion of securities coming due this year, the third-most, with another $70 billion in interest payments.

Borrowing costs for G-7 nations will rise as much as 39 per cent in 2012, based on forecasts of 10-year government bond yields by economists and strategists surveyed by Bloomberg in separate surveys. China’s 10-year yields may remain little changed, while India’s are projected to fall to 8.02 per cent from about 8.39 per cent. The survey doesn’t include estimates for Russia and Brazil.

After Italy, France has the most amount of debt coming due, at $367 billion, followed by Germany at $285 billion. Canada has $221 billion, while Brazil has $169 billion, Britain has $165 billion, China has $121 billion and India $57 billion. Russia has the least maturing, or $13 billion. – (Bloomberg)