The cost of borrowing for the British government has risen to the Italian level, as global markets made their punitive verdict the government's plan for spending.
Yield ten-year securities on Wednesday rose to 3.97%, up by 46 basis points, than the return of French bonds. Britain and France marched in lockstep until last month, before the issuance of a preliminary report on the budget of the Labor Party, which raised fears about the creditworthiness of England from the Chinese, Arabic and Russian investors.
But what really attracted interest from the markets, it is narrowing the gap with Italian bonds, which were previously perceived as a symbol of the state with poor governance, in captivity Docle Vita.
Yields on ten-year Italian securities rose slightly above 4% despite the crisis in the eurozone because of Greece, and fell below 3.98% earlier in the week.
Julian Callow, European economist at Barclays Capital said that Britain is in the center of the storm, as the Bank of England starts to cut the rate quantitative easing.
Bank bought more securities for the past 9 months than the government issued. These measures have magically reduced the cost of financing the deficits, but can lead to dramatic consequences in 2010. Markets know it. They provide a risk premium on sterling ".
"In addition we have a whole Spector uncertainty associated with elections. We have the highest deficit relative to GDP in the EU after Latvia and Ireland. There is no assurance that the next government will be enough to introduce the necessary tightening of fiscal policy ", - he said.
UK dependent on the fluctuations of securities, as foreign investors own £ 217 billion of its debt, or total 28%. This independent funds and will sell assets, if Britain would lose its AAA credit rating.
They have other attractive places to invest money, such as Turkey, Brazil or India, where the demographic situation is better, but perspetivy growth above. Chile has already cut the profitability of the British debt on some maturities.
Simon Darrek, manager of foreign exchange transactions in the Bank of New York Mellon said that world markets are not impressed by the pre-budget report in Britain and do not believe Treasury forecast growth of 3,5% in 2011.
"The government will take an extra £ 700 billion in 2014. The national debt will rise to £ 1.5 trillion. That is equal to £ 48,000 per worker, an Englishman. The market's reaction is justified, "- he said.
Of course, in Italy their problems. Government debt was much smaller than before the crisis. IMF suggests that the debt will rise to 120% of GDP next year. But this debt, mainly distributed in the thrifty Italians, who are less fickle than the foreign funds.
Debt Italian households amounted to 34% of GDP in 2007, compared to 100% in Britain. "If you look at the private and public debt, together, they will look better" - said Marc Ostwald of Monument Securities.
"While the government is going to my thoughts, perhaps we will see that spreads to the German treasury bonds widened to 120 basis points, with the risk of reaching 150, if there is no clear winner in the elections," - he said.
For Italy, this situation could be just the lull before the storm. Markets suggests that Germany, ultimately, save Greece, if necessary, preventing the impact on other countries of Central Europe.
This is a controversial proposition. Vissing Volcker, head of the finance committee of the German Bundestag, said that there should be a clear understanding that "Germany is not liable for the debts of Greece.
Vissing said that the ex-Finance Minister Pierre Steynbruk spoke only for himself, and not on behalf of the whole of Germany, when he talked about saving the laggards in the eurozone. His comments should be refuted.
Yield ten-year securities on Wednesday rose to 3.97%, up by 46 basis points, than the return of French bonds. Britain and France marched in lockstep until last month, before the issuance of a preliminary report on the budget of the Labor Party, which raised fears about the creditworthiness of England from the Chinese, Arabic and Russian investors.
But what really attracted interest from the markets, it is narrowing the gap with Italian bonds, which were previously perceived as a symbol of the state with poor governance, in captivity Docle Vita.
Yields on ten-year Italian securities rose slightly above 4% despite the crisis in the eurozone because of Greece, and fell below 3.98% earlier in the week.
Julian Callow, European economist at Barclays Capital said that Britain is in the center of the storm, as the Bank of England starts to cut the rate quantitative easing.
Bank bought more securities for the past 9 months than the government issued. These measures have magically reduced the cost of financing the deficits, but can lead to dramatic consequences in 2010. Markets know it. They provide a risk premium on sterling ".
"In addition we have a whole Spector uncertainty associated with elections. We have the highest deficit relative to GDP in the EU after Latvia and Ireland. There is no assurance that the next government will be enough to introduce the necessary tightening of fiscal policy ", - he said.
UK dependent on the fluctuations of securities, as foreign investors own £ 217 billion of its debt, or total 28%. This independent funds and will sell assets, if Britain would lose its AAA credit rating.
They have other attractive places to invest money, such as Turkey, Brazil or India, where the demographic situation is better, but perspetivy growth above. Chile has already cut the profitability of the British debt on some maturities.
Simon Darrek, manager of foreign exchange transactions in the Bank of New York Mellon said that world markets are not impressed by the pre-budget report in Britain and do not believe Treasury forecast growth of 3,5% in 2011.
"The government will take an extra £ 700 billion in 2014. The national debt will rise to £ 1.5 trillion. That is equal to £ 48,000 per worker, an Englishman. The market's reaction is justified, "- he said.
Of course, in Italy their problems. Government debt was much smaller than before the crisis. IMF suggests that the debt will rise to 120% of GDP next year. But this debt, mainly distributed in the thrifty Italians, who are less fickle than the foreign funds.
Debt Italian households amounted to 34% of GDP in 2007, compared to 100% in Britain. "If you look at the private and public debt, together, they will look better" - said Marc Ostwald of Monument Securities.
"While the government is going to my thoughts, perhaps we will see that spreads to the German treasury bonds widened to 120 basis points, with the risk of reaching 150, if there is no clear winner in the elections," - he said.
For Italy, this situation could be just the lull before the storm. Markets suggests that Germany, ultimately, save Greece, if necessary, preventing the impact on other countries of Central Europe.
This is a controversial proposition. Vissing Volcker, head of the finance committee of the German Bundestag, said that there should be a clear understanding that "Germany is not liable for the debts of Greece.
Vissing said that the ex-Finance Minister Pierre Steynbruk spoke only for himself, and not on behalf of the whole of Germany, when he talked about saving the laggards in the eurozone. His comments should be refuted.
The Telegraph
December 24
December 24
No comments:
Post a Comment