Latest news with #government debt
Yahoo
a day ago
- Business
- Yahoo
Japan Bond Rout Touches New Pain Point as 10-Year Yield Rises
(Bloomberg) -- Japan's long-term government debt yield touched the highest level since 2008, as a raft of election tax-cut pledges puts investors on edge and risks higher costs all around in the country. Why Did Cars Get So Hard to See Out Of? Advocates Fear US Agents Are Using 'Wellness Checks' on Children as a Prelude to Arrests LA Homelessness Drops for Second Year Tuesday's rise of 2.5 basis points in the 10-year yield — to 1.595% — while modest, is a reminder that it's not just bonds of 20 to 40 years that are under pressure, even if the most extreme moves have been in these super-long maturities. The uptick shows the increased vulnerability of Japan's bond market after its central bank started pulling back from massive purchases that placed a protective cushion around yields for more than a decade. An upper house election on Sunday that could see the ruling coalition lose its majority is further fueling concerns that the government will loosen its grip on its finances even more, adding to pressure on yields. 'The biggest story in Japan this week must be the spiking yields' that is playing up again, said Amir Anvarzadeh, Japan equity strategist at Asymmetric Advisors Pte. 'Bond vigilantes are finally focusing on Japan,' where debt to gross domestic product is elevated, a quarter of the annual budget is set aside for refinancing debt that was issued at lower rates, and politicians are talking about tax cuts to secure power, he said. Prime Minister Shigeru Ishiba's government is promising to ramp up spending through a familiar approach of cash handouts, while opposition parties are largely campaigning on much more expensive plans to lower the sales tax. The latest polls suggest the ruling coalition is in danger of losing its majority in the upper house, further complicating its ability to press ahead with policy and putting more pressure on it to cut taxes. If the upward movement in yields continues after the election, calls may increase for authorities to do more. Already, the Bank of Japan has announced plans to slow down its withdrawal from the market and the Finance Ministry has trimmed its issuance of debt at the super-long end. The government is closely monitoring market moves of Japan's sovereign debt, according to Economic Revitalization Minister Ryosei Akazawa, who added that fiscal concerns won't stop the government from making the necessary budget allocations to realize its economic goals. He expects the country's fiscal health to improve as a more growth-oriented economy emerges, projecting the kind of messaging bond vigilantes often jump on. The selloff in Japan's $7.7 trillion bond market is already spilling over into major debt markets, amplifying ructions driven by fears that governments around the world are spending more than they can afford. Japan's 20- and 30-year yields both climbed to their highest levels since 1999 on Tuesday. The 10-year bond yields are particularly watched because they are seen as having a direct impact on household and business spending through higher mortgage rates and other borrowing costs. Atsushi Takeda, chief economist at Itochu Research Institute, said businesses broadly don't take on debt in the super-long end, hence the rise in 10-year bond yields is something 'we must keep a close eye on.' Earlier spikes in yields in April and May slowed growth in loans by the nation's banks, hinting at the caution they generate for both borrowers and lenders. Average long-term loan rates among domestic banks in April hit the highest since 2009 at 1.428% before edging down in May. The latest gain in yields may push rates up again. The 10-year yield is being driven by instability in super-long bonds due to demand concerns and declining liquidity, said Takahiro Otsuka, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities Co. 'It can't be said with certainty that the 10-year yield will stop rising at around the 1.6% level.' Any runaway increase in this yield would be detrimental to Japan's finances, according to Mizuho Financial Group Inc.'s chief executive officer. If it goes beyond 3% or so, that would hurt the budget, according to Masahiro Kihara, CEO of Japan's third-biggest bank, who spoke in a Bloomberg Television interview. What Bloomberg Strategists say: 'The common thread between US, European and Japanese long-term debt is that fiscal policy is carrying more weight than monetary policy in terms of setting market yield genie is out of the bottle and not going back in any time soon.' — Mark Cranfield, MLIV Strategist. Read more on MLIV. 'The environment for selling bonds will continue,' said Tadashi Matsukawa, head of bond investments at PineBridge Investments Japan Co. 'Buybacks from the Ministry of Finance could be one of the key measures to stabilize yields.' For now, policymakers will likely try to play down the vulnerability of the market. Japan's Finance Minister Katsunobu Kato said on Monday that bond yields are decided by market participants, and he would refrain from commenting on specific moves. Bank of Japan Governor Kazuo Ueda has said the nation's super-long yields have a limited impact on the real economy compared to shorter-term debt. Developments will be carefully monitored, he said. Meanwhile, some market observers see the gains as a pre-election spike rather than a trend that threatens economic growth or the nation's government. The consensus among JGB investors is that any implementation of a consumption tax cut will be temporary and limited, said Ryutaro Kimura, a senior fixed-income strategist at AXA Investment Managers Japan Ltd. in Tokyo. 'Upward pressure on interest rates is likely to peak out once uncertainty over fiscal policy recedes after the election.' --With assistance from Yoshiaki Nohara, Masahiro Hidaka, Aya Wagatsuma, Gregory Turk and Paul Jackson. (Updates throughout with additional comments.) Thailand's Changing Cannabis Rules Leave Farmers in a Tough Spot The New Third Rail in Silicon Valley: Investing in Chinese AI 'Our Goal Is to Get Their Money': Inside a Firm Charged With Scamming Writers for Millions 'The Turbulence Is Brutal': Four Shark Tank Businesses on Tariffs Will Trade War Make South India the Next Manufacturing Hub? ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
4 days ago
- Business
- Yahoo
Faisal Islam: We are heading for significant tax rises
Two very different reports have reignited UK economic gloom over the past four days. Friday's economic figures showed a further monthly dip in UK growth, or GDP, in May. Earlier this week the official forecaster, the Office for Budget Responsibility (OBR), said Britain faced "daunting" risks, including the possibility that levels of government debt could soar to three times the size of the economy. Two very different timescales - the economy in a single month, and the public finances in half a century's time. At another moment both might have been largely ignored. Monthly GDP figures are notoriously volatile, and what does a debt forecast for 2075 even begin to mean? What would the Treasury forecast from 1975 tell us about this year? But these very different charts are setting the tone for some tricky judgements required by autumn and tough calls about what happens in the next half decade. The really unusual thing about the OBR's long-term risk and sustainability report was the strength of the words from its boss Richard Hughes. "The UK cannot afford the array of promises that are displayed to the public," based on reasonable assumptions about their cost and growth, he said. The report also cited a pattern, over multiple governments, of U-turns on tax and spending changes. It came within days of the government's reverses over welfare savings and the winter fuel payment. Among 36 advanced economies, the UK now has the sixth highest debt, the fifth highest annual borrowing, and the third highest borrowing costs leaving it "vulnerable", when compared to other countries, to future crises, the OBR found. The clear message was that repeatedly borrowing more is not a long-term solution to rising day-to-day spending pressures. Yet the pressure to spend more may prove stubborn, thanks to geopolitical and societal changes. The OBR's existing forecasts assume that the post-pandemic surge in incapacity and disability cases will fall half way back to normal by 2029. This is very uncertain. Local councils are now spending 58% of their revenue on social care for adults and children, with some councils spending more than 80%. A £4.6bn special financial arrangement to deal with ballooning special educational needs budgets risks mass local authority bankruptcy. The promise to increase defence spending to the new Nato target of 3.5% will cost nearly £40bn per year by 2035. The OBR's report was basically a polite plea for some realism about the choices ahead. A government with a massive majority and four more years would normally be expected to have the strength to make these sorts of decisions. As pointed out before the last election, there was little attempt to level with the public, especially over taxation. The big picture is that this autumn's Budget may see £10bn to £20bn of further tax rises. On top of this, Trump's tariffs have triggered profound uncertainty. That has pushed up UK government borrowing costs. But they are also prompting a more fundamental shift in the foundations of the global economic system, with the dollar and US government debt no longer treated as unbreachable safe havens. So how might the chancellor respond to these challenges? She may choose to rebuild the so-called "headroom" to give her a better chance of meeting her self-imposed borrowing limits. Currently that buffer is a very tight £10bn. Reeves has said she will stick to her plans to not borrow to fund day-to-day spending and to get government debt falling as a share of national income by 2029/29, despite some concern from MPs. But she is considering the International Monetary Fund's advice to only adjust her plans once a year, rather than in both spring and autumn. But there may still need to be a kitchen sink approach to this autumn's Budget, with the chancellor throwing everything she has at fixing the public finances. Ministers have not abandoned the idea of finding savings in the health-related welfare bill. A discussion is opening up about whether the Personal Independence Payment (Pip) benefit, designed to help pay for physical equipment, is the right vehicle to manage the specific surge in mental ill health. On the other hand, while politicians acknowledge the cost of the state pension triple lock is far higher than originally forecast, that policy seems to be utterly politically impregnable. So we are heading for significant tax rises. The expected further freeze on income tax thresholds will not be enough. The noise around wealth taxes points to property and inheritance taxation, as baby boomers start a mass transfer of trillions of pounds of housing equity to their children. Expect the Treasury to think very hard about what size of net it might lay in the water to ensnare bountiful revenues, aimed at funding the costs of an ageing society without levying that burden entirely on working households. Of course the great hope is the return of robust economic growth to smooth the way. Reeves' fiscal rules have left space for longer term investments in infrastructure, although the planning reforms will take some time to yield a construction boom. The UK's position as a comparatively stable island in a sea of trade tumult, should also yield dividends. Some of the world's most important business people, such as Jensen Huang of Nvidia, were falling over themselves to praise the UK's investment potential for frontier tech. The very latest economic news does contain some perking-up in levels of confidence over the past few weeks, and more interest rate cuts are on the way. Some City economists say the gloom is overdone and we are "past the worst". UK stock markets and sterling remain strong. So that is the long-term challenge laid down by the OBR, balance the books and boost the economy. A government that should still have four years of a thumping majority has the necessary power, but the past month has raised concerns about its authority. Reeves disappointed after economy unexpectedly shrinks Reeves' five choices to turn government finances around Faisal Islam: How much will U-turn on disability benefits cost? Error in retrieving data Sign in to access your portfolio Error in retrieving data
BBC News
4 days ago
- Business
- BBC News
Rachel Reeves autumn Budget will see significant tax rises
Two very different reports have reignited UK economic gloom over the past four days. Friday's economic figures showed a further monthly dip in UK growth, or GDP, in May. Earlier this week the official forecaster, the Office for Budget Responsibility (OBR), said Britain faced "daunting" risks, including the possibility that levels of government debt could soar to three times the size of the very different timescales - the economy in a single month, and the public finances in half a century's another moment both might have been largely ignored. Monthly GDP figures are notoriously volatile, and what does a debt forecast for 2075 even begin to mean? What would the Treasury forecast from 1975 tell us about this year?But these very different charts are setting the tone for some tricky judgements required by autumn and tough calls about what happens in the next half really unusual thing about the OBR's long-term risk and sustainability report was the strength of the words from its boss Richard Hughes."The UK cannot afford the array of promises that are displayed to the public," based on reasonable assumptions about their cost and growth, he report also cited a pattern, over multiple governments, of U-turns on tax and spending came within days of the government's reverses over welfare savings and the winter fuel 36 advanced economies, the UK now has the sixth highest debt, the fifth highest annual borrowing, and the third highest borrowing costs leaving it "vulnerable", when compared to other countries, to future crises, the OBR clear message was that repeatedly borrowing more is not a long-term solution to rising day-to-day spending pressures. Yet the pressure to spend more may prove stubborn, thanks to geopolitical and societal OBR's existing forecasts assume that the post-pandemic surge in incapacity and disability cases will fall half way back to normal by is very uncertain. Local councils are now spending 58% of their revenue on social care for adults and children, with some councils spending more than 80%.A £4.6bn special financial arrangement to deal with ballooning special educational needs budgets risks mass local authority promise to increase defence spending to the new Nato target of 3.5% will cost nearly £40bn per year by 2035. Time to level The OBR's report was basically a polite plea for some realism about the choices ahead.A government with a massive majority and four more years would normally be expected to have the strength to make these sorts of pointed out before the last election, there was little attempt to level with the public, especially over big picture is that this autumn's Budget may see £10bn to £20bn of further tax top of this, Trump's tariffs have triggered profound uncertainty. That has pushed up UK government borrowing costs. But they are also prompting a more fundamental shift in the foundations of the global economic system, with the dollar and US government debt no longer treated as unbreachable safe havens. Kitchen sink Budget So how might the chancellor respond to these challenges?She may choose to rebuild the so-called "headroom" to give her a better chance of meeting her self-imposed borrowing limits. Currently that buffer is a very tight £ has said she will stick to her plans to not borrow to fund day-to-day spending and to get government debt falling as a share of national income by 2029/29, despite some concern from she is considering the International Monetary Fund's advice to only adjust her plans once a year, rather than in both spring and there may still need to be a kitchen sink approach to this autumn's Budget, with the chancellor throwing everything she has at fixing the public finances. Ministers have not abandoned the idea of finding savings in the health-related welfare bill.A discussion is opening up about whether the Personal Independence Payment (Pip) benefit, designed to help pay for physical equipment, is the right vehicle to manage the specific surge in mental ill the other hand, while politicians acknowledge the cost of the state pension triple lock is far higher than originally forecast, that policy seems to be utterly politically impregnable. Netting revenue So we are heading for significant tax rises. The expected further freeze on income tax thresholds will not be noise around wealth taxes points to property and inheritance taxation, as baby boomers start a mass transfer of trillions of pounds of housing equity to their the Treasury to think very hard about what size of net it might lay in the water to ensnare bountiful revenues, aimed at funding the costs of an ageing society without levying that burden entirely on working course the great hope is the return of robust economic growth to smooth the way. Reeves' fiscal rules have left space for longer term investments in infrastructure, although the planning reforms will take some time to yield a construction boom. The UK's position as a comparatively stable island in a sea of trade tumult, should also yield of the world's most important business people, such as Jensen Huang of Nvidia, were falling over themselves to praise the UK's investment potential for frontier tech. The very latest economic news does contain some perking-up in levels of confidence over the past few weeks, and more interest rate cuts are on the way. Some City economists say the gloom is overdone and we are "past the worst". UK stock markets and sterling remain that is the long-term challenge laid down by the OBR, balance the books and boost the economy. A government that should still have four years of a thumping majority has the necessary power, but the past month has raised concerns about its authority.
Economy ME
5 days ago
- Business
- Economy ME
Moody's upgrades Oman's credit rating to Baa3 with stable outlook, citing improved debt metrics
Moody's Ratings has elevated Oman's long-term issuer and senior unsecured ratings to Baa3 from Ba1, while also adjusting the outlook to stable from positive. This upgrade signals expectations that Oman's government debt metrics will stay robust, even if oil prices dip below Moody's medium-term assumption of $65 per barrel. The rating agency highlighted the significant reduction in the debt burden over recent years and the cumulative impact of spending restraint as key factors enhancing Oman's resilience to potential future declines in oil demand and prices. At the close of 2024, Oman's government debt burden fell to 35.5 percent of GDP, down from 37.5 percent at the end of 2023, marking a continuation of the improvement trend since 2020. Moody's anticipates that most of Oman's debt ratios will keep improving in the upcoming years, albeit at a more modest pace than observed over the past four years. A stronger debt position grants the government greater fiscal space and time to implement structural reforms aimed at reducing the country's heavy economic and fiscal reliance on the hydrocarbon sector. Balancing fiscal risks Government expenditure has decreased to less than 29 percent of GDP in 2024, down from an average of over 41 percent during the period from 2016 to 2020. This spending restraint has consequently lowered Oman's fiscal breakeven oil price to under $70 per barrel for 2024-2025, compared to an average exceeding $84 per barrel in 2016-2020. The stable outlook strikes a balance against fiscal risks across various oil price scenarios. Upside risks are primarily linked to regional geopolitical tensions that could push oil prices higher, while downside risks involve the potential for an accelerated global carbon transition, which may lead to weakened hydrocarbon revenue. Additionally, Moody's raised Oman's local currency and foreign currency country ceilings to A3 from Baa1 and to Baa1 from Baa2, respectively. The rating agency remarked that Oman's credit profile remains vulnerable to fluctuations in oil prices due to its economic and fiscal reliance on hydrocarbons. The hydrocarbon sector contributed, on average, around 34 percent of GDP, 56 percent of exports, and 76 percent of government revenue during the period from 2020 to 2024. Long-term economic reforms In terms of longer-term upside potential, ongoing fiscal and economic reforms are noteworthy, including plans to introduce a 5 percent personal income tax by 2028, develop a large green hydrogen sector, and expand liquefied natural gas production capacity by a third by 2030. Oman's economy exhibited a consistent growth rate of 2.5 percent in real GDP by the conclusion of Q1 2025, reaching OMR9.43 billion ($24.52 billion) at market prices—an increase from OMR9.2 billion during the same timeframe in 2024, as reported by Oman's National Centre for Statistics and Information. This uptick in GDP was primarily driven by robust performance in non-oil sectors, which experienced a 4.4 percent increase in added value, climbing to OMR6.92 billion compared to OMR6.63 billion in Q1 2024. Oil activities faced a slight decline of 0.4 percent, contributing OMR2.92 billion in Q1 2025, down from OMR2.94 billion the previous year. Crude oil production decreased by 2.2 percent to OMR2.45 billion, while natural gas production emerged as a positive factor, soaring by 9.5 percent to OMR475.3 million. Read more: Oman's tourism attracts $6.7 billion in investments from $7.8 billion target by end of 2025 Budget surplus and current account gains Oman recorded a budget surplus of 6.2 percent and a current account gain of 2.4 percent in 2024, attributed to prudent fiscal policies, elevated oil prices, and growth in nonhydrocarbon exports. In its 2024 Article IV consultation, the International Monetary Fund credited these outcomes to effective economic management. Despite increased social spending under a new protection law, the nonhydrocarbon primary deficit as a share of nonhydrocarbon gross domestic product remained stable, highlighting the government's commitment to financial discipline. Government debt as a percentage of GDP further declined, reaching 35 percent in 2024, reflecting ongoing improvements in Oman's economic fundamentals. The Sultanate of Oman experienced an average inflation rate of 0.81 percent during the initial five months of 2025 compared to the same period last year, according to the Consumer Price Index data released by the Ministry of Economy. The report underscored a 1.3 percent rise in the general import price index and a 4.1 percent increase in the producer price index by the end of the first quarter of 2025 compared to the corresponding period in 2024. Geographical distribution revealed varied inflation rates across governorates, with South Al Batinah recording a slight decline of 0.04 percent, while A'Dakhiliyah saw the highest rate at 1.58 percent, closely followed by Musandam at 1.51 percent and South A'Sharqiyah at 1.24 percent. More moderate increases were observed in North A'Sharqiyah (0.21 percent) and North Al Batinah (0.42 percent), with other governorates remaining below one percent.
