Big Economies face $7.6trillion debt in 2012

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, surveys show. The International Monetary Fund cut its forecast for growth this year to four 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 weight of supply may be a concern,” Stuart Thomson, a money manager in Glasgow at Ignis Asset Management Ltd, which oversees $121 billion, said in a December 28 telephone interview. “Rather than the start of the year being the problem, it’s the middle part of the year that becomes the problem. That’s when we see the slowdown in the global economy having its biggest impact.” Competition for buyers The amount needing to be refinanced rises to more than $8 trillion when interest payments are included. Coming after a year in which Standard & Poor’s cut the US’s rating to AA+ from AAA and put 15 European nations on notice for possible downgrades, the competition to find buyers is heating up. “It is a big number and obviously because many governments are still in a deficit situation the debt continues to accumulate and that’s one of the biggest problems,” Elwin de Groot, an economist at Rabobank Nederland in Utrecht, Netherlands, part of the world’s biggest agricultural lender, said in an interview on December 27. 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 per cent, the most since 2008, that may change. Italy auctioned 7 billion euros ($9.1 billion) of debt on December 29, less than the 8.5 billion euros 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, data compiled by Bloomberg show. Rising costs Borrowing costs for G7 nations will rise as much as 39 per cent in 2011, 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, the U.K. has $165 billion, China has $121 billion and India $57 billion. Russia has the least maturing, or $13 billion. CARRYING THE BURDEN Bond and bill redemptions and interestpayments in 2012 for G7 countries, Brazil, China, India and Russia Country 2012 bond, bill redemptions- Interestpayments Japan                      3,000            117 United States         2,783             212 Italy                         428                72 France                      367               54 Germany                  285               45 Canada                      221              14 Brazil                        169              31 United Kingdom       165              67 China                         121             41 India                            57             39 Russia                         13                9 Figures in US$ billion Source: Bloomberg