Sometimes markets are shaken by an event so seismic that everything else seems to fade into the background. Greece’s slide to the brink of bankruptcy was such an event. With the collapse of Lehman still so fresh in the mind, cataclysmic consequences do not seem so far fetched as they once did. Nobody had any illusions as to what the stakes were as the crisis unfolded. But perhaps that was ultimately an advantage, focusing the minds of the politicians and financiers. Although the problem has not

Governments across the world are continuing to borrow substantially in the bond markets, with 2010 forecast to be another record year of supply. Estimates for issuance in Europe could hit the €1trn mark, a roughly €60bn increase on last year’s levels of €937bn. In the US it is expected to raise record debt sales to cover its US$1.4trn deficit. The UK will issue £187.3bn of Gilts for fiscal year 2010/11. Standard & Poor’s (S&P) is projecting significant estimated general government defici

When Eurostat first drew attention to irregularities with Greek data in its reporting of its budget deficit on January 8, few imagined that could spiral into a eurozone-wide crisis. Four months on, a bailout package has been agreed between the European Union and the International Monetary Fund for Greece. But with other southern European countries also struggling under the weight of massive budget deficits, questions are being raised about the future of the eurozone. After months of dithering, t

Some buyers of sovereign debt have undoubtedly been enjoying this year’s roller coaster ride of headline-driven, rapidly fluctuating spreads. Hedge funds and prop desks at banks have participated in the volatility that’s characterised the secondary market for sovereign bonds in the aftermath of the Greece debacle. Sovereign bond market experts believe they will continue to drive this market for the foreseeable future. However, all investors – be they opportunistic or dedicated, long-term soverei

This year the Hellenic Republic has a financing requirement of around €54bn. It had sold three benchmark deals in the first four months of the year, raising about €24bn by early April. The bulk of this was made up of a €8bn August 2015 deal and a €5bn June 2020 issue, together with the €5bn through a new seven-year bond. The balance of about €6bn consisted of bills sold in January and a €2bn FRN also sold at the beginning of the year. In April there was a successful refinancing of these bills wh

The recent divergent spread performance within Europe is the mirror image of the compression that took place in the lead up to the introduction of the common currency. Given the widening of peripheral spreads and the dramatic fall from grace of Greece, the pendulum has now swung full circle: Germany has regained the exalted status it enjoyed in the early 1990s. The performance of European sovereign spreads was widely expected to come under scrutiny this year, although the pace at which the dislo

When central banks in the US and the UK began pumping new money into the banking system and buying up government bonds, in order to unblock the credit markets in the latter part of 2008 and early 2009, it begged two big questions. Will it work? And how will it be unwound? The first question has been answered. Quantitative easing has encouraged banks to start lending to clients again, rather than simply borrowing at low-to-no interest and investing it in government bonds – though the cost at whic

The Russian Federation returned to the Eurobond market on April 22 in rather different circumstances to its previous visit just prior to the 1998 domestic debt default. The sovereign raised US$5.5bn from five and 10-year issues, pricing in line with official guidance at 125bp and 135bp wide of US Treasuries. This translated into a 10-year yield of 5.082%, inside the Polish, Italian and Spanish sovereign curves and just wide of Brazil, Ireland and Portugal. Such an impressive result reflects the

At close to 200%, Japan’s debt-to-GDP ratio is the highest in the developed world. And things are set to get worse, with a sharp increase expected this year. As the country’s deflation nightmare shows little sign of abating, Fitch Ratings has made a base estimation that the unadjusted ratio will rise to 214% by the end of 2010. But Japan is not another Greece. The domestic conditions and the unique ownership structure of the government bonds have allowed continuous funding at low levels througho