Comments on: Emerging Economies Risk Being Crowded Out As First World Steps Up Borrowing

By: Anonymous

Anonymous — Tue, 30 Dec 2008 01:10:00 +0000

The huge discrepancy in the number for China:

Could it be that FT is reporting a gross number, and SAFE is reporting a net number?

That would roughly be correct...

By: daniilm

daniilm — Mon, 29 Dec 2008 22:13:00 +0000

Well, Russian number does sound right to me, if one speaks of total debt of government and private sector (most of large private borrowers are state-controlled anyway). Only a fraction of this debt is due soon, but Russian government will have to borrow eventually (probably not in 2009) to cover the budget deficit.

By: Silas Barta

Silas Barta — Mon, 29 Dec 2008 19:30:00 +0000

Oh, geez, I'm tired of hearing crap like this. So, developed markets are borrowing SO MUCH that they're crowding out the emerging markets from getting reasonable interest rates? WOW, that must mean a bonanza for savers like me!

*checks Vanguard account*

*money market yield: 2.76%*

*facepalm*

By: Anonymous

Anonymous — Mon, 29 Dec 2008 09:35:00 +0000

Its not just emerging markets that might get crowded out and it seems unlikely that the US is top of the list. Recent UK gilt auctions have been unimpressive and German there have been Four ten year bund auctions failures during the year. To a certain extent this reflects differences in the market and philosophies, with government debt being somewhat crowded out by corporate debt (particularly banks and mutuals like the UK’s Nationwide) which offers better yields and in some cases has government backing.

Merkel’s statements about not borrowing for a fiscal stimulus, might actually be that they may have difficulty borrowing. When you consider that in all probability Japanese and German debt is probably higher up the ladder than US and ought to crowd out US debt then the future of US treasuries looks uncertain. It is the big US institutional investors who can see no alternative but the safe haven of US treasuries that will keep driving demand. This is worrisome in that where European investors are beginning to diversify and pick for value US investors clearly are working from an out of date rule book and see very little value anywhere in the US economy.

The big shock next year will be that the UK is crowded out, which will lead to printing and a further decline for sterling.

By: Hubert

Hubert — Mon, 29 Dec 2008 09:23:00 +0000

Most figures look high indeed. Maybe someone at FT confounded total debt due with external debt due.
But then who knows? The real figures should be very interesting. Anybody any ideas what ING has really published?

By: john bougearel

john bougearel — Mon, 29 Dec 2008 07:17:00 +0000

The Dec 23 auction was a 5 year auction.

By: baychev

baychev — Mon, 29 Dec 2008 06:52:00 +0000

those chaps just stopped short of calling an usd rally based on the expected huge demand for a few trillion of 0 yield paper.

By: Yves Smith

Yves Smith — Mon, 29 Dec 2008 06:12:00 +0000

Brad, K, thanks. Wow, another sign the FT is slipping.

By: john bougearel

john bougearel — Mon, 29 Dec 2008 06:05:00 +0000

On Dec 22, bloomberg noted foreign central banks bought 30% of the 2 yr note auction compared to 35% in the previous auction.

Foreign central banks bought 25% percent of the notes at the Dec 23 auction, compared with 37% at the November sale.

These back to back auctions indicate demand is falling off a cliff the further out on the curve you go. The auction results indicate foreign central banks may be taking much less interest in our longer-dated securities ~ as in they may be slamming the door shut on any further substantial investment in them. This is only a preliminary to be watched closely. As the financial crisis passes through its acute phase, there will be less incentive for buying treasuries for their safe haven status, allowing central banks to diversify their investmests in emerging mkts and the like

By: Anonymous

Anonymous — Mon, 29 Dec 2008 06:03:00 +0000

I second K’s comment. The number for China is off. The number for Russia ($605b) is also far higher than Russia’s total external debt as reported on the bank of Russia’s web site. The amount of Argentina’s external debt coming due also seems high — at least if the defaulted debt and interest arrears is left out of the calculation. the 05 restructuring if nothing else really pushed out the payment of principal on the GoA’s external debt, and i find it hard to believe Argentina’s private sector has that much coming due …

bsetser