Join our investing community

Risks of failed bond auction mount in debt market deluge

Discussion in 'The Economy' started by Tropo, 12th Jul, 2009.

  1. Tropo

    Tropo Well-Known Member

    Joined:
    17th Aug, 2005
    Posts:
    3,394
    Location:
    NSW
    Risks of failed bond auction mount in debt market deluge
    Neale Muston
    July 11, 2009

    A looming crisis in the financial markets is threatening the ability of the Australian Government to finance its announced fiscal stimulus. An unprecedented volume of debt issuance threatens to strangle the Australian bond market and place a dire dependence on foreign investment to fund the budget deficit...
    Risks of failed bond auction mount in debt market deluge
     
  2. Chris C

    Chris C Well-Known Member

    Joined:
    2nd Apr, 2008
    Posts:
    1,327
    Location:
    Brisbane, QLD
    I don't know what others think, but my gut would tell me that countries like the US and the UK will have much greater problems with their bond auctions going forward than the Australian government.

    Whilst we also have the private debt problems that the US and UK have - we are holding a couple aces in the fact that our Government doesn't have any debt at the moment, and that we are probably one of the most financially and legally secure countries within Asia, which I think most see as the future. So I think Australian bonds, just like our economy, will do better than most developed nations as we enter this "worldwide government deficit" period.

    It will actually be quite interesting to see how the Australian bond market holds up if some of the bigger player's cracks start turning into gaping holes.

    I was just looking at some of the CDS on various sovereign debts, and it looks like the good old state of California has about a 25% of default over the next 5 years!