Government Debt

Market angst about France infects whole of EU

17 Mar 2017

Far-right leader Marine Le Pen has promised to reshape French ties with the European Union if elected president. That would be an existential test for the whole bloc. Currency options prices show investors have rarely been so anxious about the EU-wide impact of a single event.

Do-nothing UK budget belies big risks ahead

8 Mar 2017

Finance Minister Philip Hammond revealed minimal changes to tax and spending. His prudent message makes sense, but contrasts with the large and unpredictable economic consequences of leaving the European Union. It won’t take much for these to knock deficit reduction off course.

What Christine Lagarde might say to Marine Le Pen

28 Feb 2017

The presidential candidate wants France to quit Europe’s single currency. The possibility that she might win is already spooking markets. Breakingviews imagines the advice Le Pen might get from her compatriot, International Monetary Fund head Christine Lagarde.

Cox: Swamp is another name for checks and balances

16 Feb 2017

Donald Trump vowed to drain the capital's metaphorical fens. He has also redefined the objective from ridding Washington of its mosquito-like lobbyists to avoiding getting bogged down in a governance morass. The founders intended the separation of powers to be a useful swamp thing.

French corporate debt immunity to Le Pen will fade

15 Feb 2017

Even the slim possibility that far-right leader Marine Le Pen might lead France out of the euro zone has pushed up government bond yields. By contrast, corporate debt has suffered relatively little damage. Savvy investors will make this anomaly disappear soon.

Treasury pick can only stare at (debt) ceiling

10 Feb 2017

As Steve Mnuchin awaits Senate confirmation, the clock is ticking on the $20 trln U.S. borrowing limit. Raising the cap has become a struggle in recent years. It'll be a big first test for the Treasury secretary, especially considering Donald Trump's blasé remarks about default.

Greece is in a mess but not at the brink

3 Feb 2017

The government, its European creditors and the IMF are all being unreasonable in their own way over a bailout needed by July. The most sensible option would be for the IMF to withdraw. More likely is that if a compromise can't be found, the ruling Syriza party calls an election.

Europe’s “whatever it takes” becomes “what next?”

2 Feb 2017

Bond yields are rising as the end of money-printing looms. The return of a crisis like the one that prompted ECB President Mario Draghi's pledge to save the euro zone is unlikely. Yet as investors focus on political risk and debt, governments will face tougher choices.

French elections beat Brexit for market disquiet

30 Jan 2017

The Gallic vote is worrying investors more than Britain leaving the EU. It now costs over a third more to insure against a French default than a UK one, though rating firms see little chance of either going bust. It's the scope to weaken its currency that gives Britain an edge.

Kuwait’s strength could be a weakness

17 Jan 2017

The oil-rich sheikhdom is planning its first dollar debt sale. It should be a hit: Kuwait has a good fiscal record and vast foreign assets. Yet other Gulf states are weaker, raising the risk of devaluations or euro zone-style bailouts. The strongest may end up bearing the burden.

Hadas: The new autocratic economics is still fuzzy

12 Jan 2017

Muscular leaders have diverging concerns. Oil-dependent Putin does little to promote Russian growth. China’s Xi puts expansion above financial stability, while Turkey’s Erdogan risks the economy for political strength. The common factor is state control, greased with corruption.

Maduro will survive, just, on Venezuelan tightrope

28 Dec 2016

The economy is a wreck, but the country's inept leader has probably done enough to avoid being forced from office in 2017, unless by fellow Chavistas. A bond swap and army-led food programs helped. His gutting of institutions, though, risks violence that may yet be his undoing.

Renzi has time for one last gamble

8 Dec 2016

Despite resigning as Italy’s prime minister after losing a referendum, there’s a way back for Matteo Renzi: a quick election. That could pit him against the 5-Star Movement, which wants a vote on the euro. Renzi may still have enough support to win, but would need to move fast.

MPS solution requires further bondholder sacrifice

7 Dec 2016

The Italian bank has secured a fifth of the 5 billion euros it needs in new equity by turning some bonds into shares. The priorities are to protect retail depositors and attract outside investment. Institutional investors, and Brussels, will both have to give a little.

French bond rot has capacity to spread

7 Dec 2016

Gallic bonds are trailing euro zone peers. This suggests investors are worrying that the far-right's Marine Le Pen might do better in the 2017 presidential elections than polls show. Were her chances to improve materially, market damage would quickly spread across the region.

S&P’s sleight of hand is South Africa’s gain

2 Dec 2016

The credit ratings firm has downgraded the sub-Saharan state's local currency bonds but spared its foreign debt. This allows South Africa to escape junk status for the time being. Almost as important, there's no excuse now for firing respected finance minister Pravin Gordhan.

Credit markets ill-prepared for Trump presidency

21 Nov 2016

The U.S. president-elect may boost spending and growth. But higher interest rates would also push up funding costs for companies and emerging economies. Though credit investors have largely shrugged off Trump’s victory, the end of loose monetary policy could prove a shock.

Russia cracks down on economy minister at a cost

15 Nov 2016

Alexei Ulyukayev may or may not be guilty of accepting a $2 mln bribe. But the detaining of the economy minister means Russia loses one of its more rational government voices. It also raises the risk of reduced fiscal caution that the domestic economy can ill afford.

Portugal delays day of reckoning for another year

19 Oct 2016

Further tax increases mean the troubled country should avoid a debt downgrade, keeping its bonds eligible for ECB money-printing. Yet Lisbon's high debt load and weak growth mean the risk of a restructuring hasn't gone away. It could kick in after next year's German elections.

Government bonds signal confusion, not cheer

19 Sep 2016

Yields on long-term sovereign debt have perked up across the developed world. Normally that's a sign of optimism. Yet borrowing costs remain ultra-low. The upward drift most likely reflects uncertainty about central bank policy and worries about the effects of negative rates.