Fitch said rising government bond yields are making it much harder for major developed economies to stabilise debt burdens. Benchmark 10-year yields in the 10 largest developed economies have risen by an average of 81 basis points so far this year. France, the US and Britain face growing fiscal challenges.
Rising government bond yields are making it much harder for major developed economies to stabilise their debt burdens, credit rating agency Fitch said on Tuesday. France, the US and Britain face growing fiscal challenges, the agency said.
Yield rise could add nearly $4 trillion to debt
In a report, Fitch said benchmark 10-year government bond yields in the world's 10 largest developed economies had risen by an average of 81 basis points so far this year. That would contribute to a nearly $4 trillion increase in overall developed-market government debt, taking it above $75 trillion, or $68.5 trillion across the top 10 economies.
The median 10-year yield across the largest developed economies is now 161 bps above the average interest rate paid on outstanding debt. That gap makes it harder to reduce or even stabilise debt levels.
France faces one of the steepest challenges
According to Fitch, France would need to cut its primary deficit to 0.4% of GDP from a projected 2.9% this year to stabilise its debt burden. A rise in effective borrowing costs to current market yields would require a further fiscal adjustment of about 3.1% of GDP.
The US is expected to run the largest general government budget deficit this year, at 7.5% of GDP, or $2.4 trillion. France follows at 5.4%, then the UK at 4.8% and Germany at 3.7%.
Deficits widen most in Germany
Germany is expected to see the widest deficit increase this year, 1.1 percentage points. The US and Canada follow, both at 0.7pp, while Britain's deficit is expected to narrow the most, by 0.4pp.
By 2030, debt-to-GDP ratios are forecast to rise most in France, by 12pp to 128%, followed by the US and Germany. Japan's ratio is expected to fall 11pp to 185%.
Source: Economy News
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