$7.6 Trillion Debt Looms Over World's Biggest Economies
By siliconindia   |   Wednesday, 04 January 2012, 20:55 IST
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$7.6 Trillion Debt Looms Over World\'s Biggest Economies
Italy is followed by France with the most amount of debt due at $367 billion and Germany at $285 billion. Canada has US$221 billion, while Brazil has $169 billion, the U.K. has $165 billion. China and India on other hand have $121 billion $57 billion respectively. Russia has the slightest maturing with $3 billion. Greece, Portugal and Ireland were forced to request for bailouts from European Union and IMF due to soaring borrowing costs. 7 percent exceed in Italy's 10 year yield last month, preceded the demand for aid from those three nations. Michael Riddell, a London-based Fund Manager at M&G Investments, which oversees about US$323 billion said, "The buyer base for peripheral Europe has obviously shrunk at the same time that the supply coming to the market is increasing, which is not a good combination." Japan and U.S., the biggest debtors, have shown modest difficulty to draw demand. Japan enjoys surplus in its current account with trade and doesn't need to depend on foreign investors to finance its budget deficits. The dollar's role as the world's primary reserve currency benefits U.S. Though Japan's debt is about twice the size of its economy, its 10-year bond yields less than 1 percent; the second-lowest in the world, after Switzerland. Bloomberg data shows, as the yields on 10 year Treasuries are below 2 percent, there are very scarce chances for U.S. bonds to repeat last year's gains of 9.79 percent, according to investors. An average interest rate of about 2.18 percent is paid by U.S. on its outstanding debt, down from 2.51 percent in 2009. Eric Pellicciaro, Head of Global Rates Investment at New York-based BlackRock, which manages $1.14 trillion in fixed-income assets, said, "Given how well they have done, we don't think they're any longer a very good hedge." Central banks are strengthening demand by keeping interest rates lows or by reducing them and by buying bonds through a policy know as Quantitative Easing. The refinancing rate of the European Central Bank (ECB) reduced twice last quarter, to 1 percent from 1.5 percent. According to Fabrizio Fiorini, the Chief Investment Officer at Aletti Gestielle SGR SpA in Milan, the money from the ECB may be used by banks to purchase government bonds.

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