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New Statesman
11-07-2025
- Business
- New Statesman
Britain faces another showdown with the bond market
Normal British people don't spend much time thinking about the Japanese central bank. Normal Japanese people probably don't, either, but decisions taken in Tokyo can have significant effects for you. It was in Japan that the great quantitative easing experiment began, and as I've argued at length, the massive distributional effects this had on wealth reshaped politics and culture in the UK, the US and Europe. But that experiment is far from over. If you think Britain's interest rates were crazily low in the 2010s, well, you're right, but in Japan they were negative for eight years. Even now their Bank rate remains at 0.5 per cent. This created the possibility for what's called a 'carry trade' – borrowing cheaply in one currency to finance investment in another currency. You could borrow at rock-bottom rates in yen, use that to buy British bonds, and keep the difference. The more money you use to do this, the more profit you make. Lots of people have been doing this for a long time, because Japan's central bank has kept rates artificially low in an attempt to combat deflation and stimulate the country's economy during its decades-long stagnation. The reason you, a normal person, should care about this is that it increased demand for the government bonds of other countries (because those 'carry trade' investors needed something to invest their borrowed money in). This meant the market gave us better prices for our debt. Even as the Bank of England raised its interest rates, the Bank of Japan kept monetising like it was 2009 – and in doing so, made it cheaper for our government to borrow money. Domo arigato, Bank of Japan! But this arrangement could not last forever. The Bank of Japan has now begun (very gradually) to raise its rates, making it more expensive to borrow in Japan. It has also been telling investors it plans to raise rates further, and with inflation rising there, investors know it will probably have little choice but to do that. The yields on Japanese government bonds have therefore been rising, which means the Japan discount for other countries' borrowing is being taken away. This is one of the reasons our borrowing has been getting more expensive – because without cheap yen fuelling demand, there isn't as much demand for the gilts that the Debt Management Office sells to finance public spending. This compounds another problem the UK has: credibility. It's not about what the government wants to do, but whether it can actually do it. The bond market does not really care about politics. But if a UK government with a working majority of 165 cannot push through an attempt to relieve some wealthy pensioners of a £200-a-year bung that was, for most of them, totally unnecessary, this does matter. It sends a strong signal to investors that the government does not have fiscal control. The same goes for welfare reform: the market does not care about the politics. But if the government says it is going to do £5.5bn of fiscal consolidation and then can't, this goes into the calculations investors make about the prices of bonds in future. See also this week's latest U-turn on reforming the energy market: bond investors may or may not have an opinion on whether that would have led to lower energy prices (and therefore inflation); but the fact that the government once more said it was going to do something, and then didn't, will end up in some price calculations. Subscribe to The New Statesman today from only £8.99 per month Subscribe That said, you might well ask why the UK, which is run by sensible people, is being charged more to borrow than the US, which is £36.6trn in debt – equivalent to 120 per cent of its GDP – and is run by a weird, unpredictable proto-despot who is cheerfully piling trillions more on top of this. The US has the dollar, and while Donald Trump's fiscal policy is mad, it is under his control. France also gets better rates from the market, despite running a monster deficit, because its fortunes are linked to the rest of Europe. The UK is smaller and more isolated. We are also more reliant on overseas investors for government borrowing than other countries – more UK gilts are held overseas than the debt of any other large economy – and as the Office for Budget Responsibility noted this week, the other major source of demand for long-term debt (defined benefit pension funds) is fading away. We are increasingly selling short-term rather than long-term debt. More than other countries, we are vulnerable to the whims of whomever decides to lend us money. This is why some economists are increasingly concerned that the UK could be first in line for a beating from the bond vigilantes. Albert Edwards, global strategist at Société Générale, told me this week that there is a global problem of loose fiscal policy colliding with tight monetary policy. 'The bond markets are looking to teach someone a lesson,' he told me, and when the market collectively decides who is the weakest link, 'they may well turn their attention to the UK'. In a note to investors yesterday, Edwards warned: 'The Liz Truss Budget debacle back in September 2022 might seem like a tea party compared to what is coming down the line.' This makes it all the more important that the government takes big steps, now, to assert fiscal control, rather than hoping that it will be alright if they just promise to pile on a load more stealth tax in October. There is an increasing risk that debt markets will cease to tolerate the status quo. This piece first appeared in the Morning Call newsletter; receive it every morning by subscribing on Substack here [See also: Starmer and Macron cement a new special relationship] Related
Business Insider
29-06-2025
- Business
- Business Insider
Nigeria's public debt hits ₦149.39 trillion as Naira falls amid incessant borrowing
Nigeria, the fourth-largest African economy, has seen its total public debt rise to ₦149.39 trillion (approximately $97 billion) as of March 31, 2025. Nigeria's public debt rose to ₦149.39 trillion ($97 billion) by March 2025, marking a 22.8% increase from the previous year. External debt accounted for ₦70.63 trillion, growing significantly due to currency depreciation and borrowing from global lenders. Nigeria faces increased debt servicing costs attributed to currency volatility and rising external debt obligations. This represents a record increase of ₦27.72 trillion, or 22.8%, compared to ₦121.67 trillion recorded in the same period last year. According to the latest Debt Management Office (DMO) figures, the country's debt rose by ₦4.72 trillion, or 3.3%, from ₦144.67 trillion at the end of December 2024. Nigeria's public debt has been driven by domestic and external borrowing to fund budget gaps, compounded by the impact of a weakening naira on external debt valuation. Impact of ₦70.63 trillion debt on currency Recent financial data shows that Nigeria's external debt now stands at ₦70.63 trillion as of Q1 2025, up from ₦56.02 trillion in the same period in 2024, reflecting a ₦14.61 trillion or 26.1% yearly increase. On a quarter-on-quarter basis, the increase was more modest, with the figure rising marginally by ₦344 billion from ₦70.29 trillion at the closing of the previous year. Notably, the disparity between dollar and naira growth in the debt figures highlights the deepening impact of foreign exchange volatility. While the dollar-denominated debt rose by only $3.86 billion, the naira equivalent surged due to the depreciation and incessant servicing of the local currency. Reports showed that in Q1 2024, the Central Bank of Nigeria used an exchange rate of ₦1,330.26/$1. Although the official rate for Q1 2025 was not disclosed, the steep rise in naira terms points to a further decline in currency value. The country's rising debt is partly due to external borrowings from multilateral lenders, bilateral partners, and commercial creditors, including World Bank and Eurobond holders, which has increased the cost of external loans in local currency terms. This has also limited the country's ability to fund development projects, as a significant portion of revenue goes toward repaying interest and principal on external loans. Domestic debt nears ₦79 Trillion More data showed that Nigerian domestic debt continued to climb, reaching ₦78.76 trillion ($51.26 billion) as of March 2025, representing a record ₦13.11 trillion or 20% increase from ₦65.65 trillion in March 2024. On a quarterly basis, domestic debt grew by ₦4.38 trillion or 5.9% from ₦74.38 trillion in December 2024. The Nigeria's federal Government accounts for the majority of the domestic debt at ₦74.89 trillion ($48.73 billion), while the 36 states and the Federal Capital Territory (FCT) collectively owed ₦3.87 trillion ($2.52 billion), highlighting a slight decrease from ₦4.07 trillion in Q1 2024 and a hint at better debt servicing or reduced borrowing at the subnational level. As of Q1 2025, Nigeria's debt portfolio is nearly evenly split, with domestic debt accounting for 52.7% and external debt 47.3%, representing a subtle shift from 2024 when domestic debt made up 54%. The increase in the share of external debt, particularly in naira terms, highlights growing risks associated with Nigeria's foreign borrowing strategy, as a weakening currency inflates repayment costs. Analysts warned that Nigeria's rising debt profile, especially the external portion amplified by currency risks, could jeopardize debt sustainability and strain future budgets through mounting debt servicing costs. With the country's debt load approaching ₦150 trillion ($97.79 billion), coupled with weak revenue growth and currency instability, experts are increasingly concerned about the reckless approaches to debt sustainability and the country's ability to balance growth with fiscal responsibility, especially under scrutiny from global credit rating agencies.
3yon News
16-06-2025
- Business
- 3yon News
ترامب من قمة السبع: إيران لن تنتصر ويجب أن تتفاوض قبل فوات الأوان
DMO Patience Oniha Dr Patience Oniha, Director-General, Debt Management Office, DMO, says Nigeria is on a steady path of economic recovery, driven by fiscal reforms, improved credit ratings, and targeted investments in infrastructure and environmental sustainability. Mrs Oniha said this at an investors meeting for the Series III Sovereign Green Bond issuance on Monday in Lagos. She said that Nigeria had recorded notable improvements in its macroeconomic fundamentals, including stabilising inflation, gradual Gross Domestic Product, GDP, growth, and a rebound in crude oil production. According to her, global credit rating agencies, including Moody's and Fitch, had upgraded Nigeria's outlook, reflecting growing investor confidence in the country's economic trajectory. 'We have seen improvements in our ratings. There is clearly a difference from where we were before. 'This suggests that the reforms are working, even if the results are gradual,' she said. On inflation, Mrs Oniha said that while it initially spiked to 30 per cent, it has since stabilised between 23 per cent and 24 per cent. 'That stabilisation is an indication that the economy is responding to monetary and fiscal policies,' she said. She stressed the importance of GDP growth and infrastructure investments. 'We have seen post-COVID growth, though we acknowledge it should be higher. 'That is why there is a strong focus on infrastructure through the three-year National Development Plan. 'It is private sector-led, and once infrastructure improves, growth will accelerate,' she said. She highlighted the recovery in oil production, noting that Nigeria had increased output from below one million barrels per day to between 1.5 and 1.6 million barrels. She said that reforms in the oil sector, which include the unbundling of the NNPC into a limited liability company, were yielding results. Turning attention to Nigeria's growing commitment to climate financing, Mrs Oniha announced plans to issue a N50 billion Sovereign Green Bond. According to her, the bond, which follows earlier issuances in 2017 and 2019 totaling about N25.69 billion, is part of the country's broader strategy to tackle climate change and support environmental sustainability. NAN
Finextra
21-05-2025
- Business
- Finextra
Bloomberg Terminals back up after outage
Bloomberg terminals were hit by a global outage on Wednesday, disrupting trading round the world. 0 This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community. Terminals - which cost more than $25,000 a year for a single license - are a vital tool for investors, enabling them to access live prices, data and news. The outage forced the UK Debt Management Office to extend bidding for a bond auction by 90 minutes. Another debt sale in Portugal was delayed from the morning to afternoon. The glitch, which Bloomberg has called an "internal issue" was fixed before 1:00pm BST. "Our systems are returning to normal operations and Terminal functionality has been restored following a service disruption earlier today," says a spokesperson.
Yahoo
21-05-2025
- Business
- Yahoo
UK bond auction disrupted as Bloomberg terminals freeze
An auction of UK government debt was thrown into chaos after Bloomberg terminals on which investors rely suddenly stopped working. Britain's Debt Management Office (DMO), which is charged with raising money for the Government, was forced to extend the length of an auction after screens froze across the City of London on Wednesday morning. Bloomberg admitted to a 'a global terminal issue', prompting frustrated traders to complain of 'a fate worse than death' on social media. The DMO was seeking to sell £4.25bn worth of bonds due for redemption in 2031 at a rate of 4pc to help Rachel Reeves finance her spending. The auction was meant to run from 9am to 10am but was extended to 11.30am amid the terminal turmoil. Professional investors around the world rely on Bloomberg terminals for real-time market data, crunching numbers and executing trades. The product has helped turn US billionaire and former New York mayor Michael Bloomberg into the 18th richest person in the world, according to Forbes. One trader complained on social media: 'Bloomberg not working, so sales people are actually trying to talk to me. Please IT gods, save us.' Some functions, such as instant messaging on the terminal, remained in operation, but users reported extreme delays in accessing market data. A single terminal subscription typically costs around £21,000 a year, nearly the same as an entry-level employee in many industries. Bloomberg's help-desk said: 'We're currently experiencing a global terminal issue, and our engineering team is actively working to identify and resolve the problem. 'We sincerely apologise for the inconvenience, and we truly appreciate your patience and understanding in the meantime.'. The Bloomberg terminal outage prompted speculation that the company may have become the latest to fall victim to hackers. Pierre Andurand, a French businessman and hedge fund manager, wrote on X: 'Bloomberg has been down for over 20 minutes ... cyber attack?' Several British retailers have been targeted by hackers in recent weeks, including Co-op, Marks & Spencer and Harrods. M&S warned on Wednesday that it faced a £300m hit to profits as a result of the cyber attack and said disruption to its online services could last months. A Bloomberg spokesman said: 'Our systems are returning to normal operations and terminal functionality has been restored following a service disruption earlier today.' Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
