Latest news with #sovereigndebt
Free Malaysia Today
5 days ago
- Business
- Free Malaysia Today
Malaysian bond outflows to ease on Fed cut bets, lower dollar
Global funds withdrew US$1.2 billion from Malaysian sovereign debt last month, the largest outflow since October. (EPA Images pic) KUALA LUMPUR : Foreign outflows from Malaysia's domestic bond market may ease, according to Convera Singapore, as growing expectations of Federal Reserve (Fed) interest-rate cuts begin to shift investor sentiment. Global funds withdrew US$1.2 billion from Malaysian sovereign debt last month, the largest outflow since October, as the dollar gained for the first time this year. Following weaker-than-expected US nonfarm payrolls in July, swap markets now price in at least two Fed rate cuts this year. The prospect of looser US monetary policy and a weaker greenback may boost demand for higher-yielding emerging-market assets like Malaysian bonds – just as domestic inflation cools, with prices in June rising at their slowest pace since February 2021. 'There are signs that the worst of the outflows may be behind us,' said Shier Lee Lim, an FX and macro strategist at Convera. 'For the remainder of the year, the outlook for Malaysia's bonds will depend on broader emerging market risk appetite, the direction of US interest rates, and clarity on local policy,' Shier said.
Forbes
07-08-2025
- Business
- Forbes
What Is The Role Of Gold In A Debt-Stricken World?
Mitch Salchow is President of Thor Metals Group. The world is currently mired in record-setting debt. Last year, the combined borrowing of households, businesses and governments across the globe eclipsed $315 trillion. And in the first quarter of this year, global debt surged by another $7.5 trillion, reaching a new high of $324 trillion. Heavy global debt loads can lead to widespread economic instability, currency devaluation, reduced private and public investment and an increased risk of a global fiscal crisis. And one of the consequences of mounting debt levels in today's environment are the skyrocketing debt servicing costs—or the amount of money required to not only repay borrowed loans but also the interest that has accrued on those loans. The impact on business is particularly pronounced as rising global debt can undermine consumer spending, trigger higher borrowing fees, suppress available capital and result in corporate bankruptcies and/or insolvencies. Global Debt-To-GDP Ratio Nearly every country in the world holds debt, but some nations are more vulnerable than others in what is now considered to be a "High-Debt, Slow-Growth World." At over $36 trillion, the United States owes more money than any other country in the world, and America's debt burden is increasing on average by about $1 trillion every three months. The U.S. is followed by China, with a national debt of around $18 trillion, and Japan, with around $9 trillion of sovereign debt. While high debt figures are worrisome for any economy, a nation's debt-to-GDP ratio is a more critical measure of financial health since it indicates a country's ability to repay its liabilities relative to the size of its economy. The higher the ratio, the less likely it is that a country possesses the economic output to pay back its loans. Based on data from the IMF World Economic Outlook, here are the countries with the highest debt-to-GDP correlation: • Sudan: 252% of GDP • Japan: 235% of GDP • Singapore: 175% of GDP • Greece: 142% of GDP • Bahrain: 141% of GDP • Maldives: 141% of GDP • Italy: 137% of GDP. • United States: 123% of GDP • France: 116% of GDP • Canada: 113% of GDP Each of these nations has a debt tally that exceeds their total economic output or the overall value of all of the goods and services produced within their respective borders. At almost 123% of GDP, America's debt liability not only threatens the solvency of essential programs like Social Security, Medicaid and Veteran's benefits—it also elevates the risk of a financial crisis. The Precarious Value Of Money Global debt has been rising for well over a decade, but Covid-19 and the resulting lockdowns, business closures, government assistance and relief programs impacted global debt accrual. The fallout of black swan events like wars and pandemics can trigger higher interest rates, increase inflationary pressures, depress economic growth, erode investor confidence and depreciate the value of money. History provides an infamous example of debt-driven currency devaluation in the case of the German Papiermark. In the 1920s, money was printed to pay off war debt and fund reparations, which led to crippling hyperinflation. The "mark" became so worthless that iconic photos of German citizens using banknotes as wallpaper serve as a sobering reminder of how quickly and completely debt can destroy the value of legal tender. The Global Safety Net Central banks have been acquiring gold at record levels. Gold has long been recognized as a time-tested store of value—and many of the world's banks are on a buying spree in an effort to prop up their currencies, diversify their reserves and protect their economies. Gold is an inflation hedge and widely regarded as crisis insurance. It is highly liquid and globally accepted, but most of all, it can be a safety net and a lifeline to governments plagued by the high debt levels. Indeed, gold is now the world's second-largest reserve asset. With debt now reaching unsustainable levels, the role of gold has changed. It is no longer just as a safe haven play or a crisis asset. It is now one of the preferred capital resources of some of the world's leading monetary authorities. It has worldwide relevance and universal appeal, and its role as a medium of exchange and a global store of value is becoming more and more established. And as the value of paper money becomes increasingly unstable, I think this trend will likely continue. Investing Considerations Investment advisors, wealth managers and portfolio planners who position gold as an essential asset class could help their clients tap into its benefits as a strong diversifier, a stable long-term investment and a commodity with the potential for significant capital appreciation. As with any investment, though, it's important to note that acquiring gold does carry some downside. First, it is considered a non-yielding asset, meaning it doesn't pay interest or dividends like CDs, bonds, stocks or Treasurys. Secondly, storing pure gold coins or bars is an added consideration and possibly an added expense. Gold needs to be kept in a secure environment safe from theft, corrosives, moisture and possible natural disasters, etc. In addition, the price of gold can be volatile. It is heavily influenced by ever-changing demand triggers. For instance, gold has traditionally had an inverse relationship with Wall Street and the dollar. So, when the markets are high and the dollar is strong, gold prices tend to slump—and vice versa. Additionally, sometimes gold is negatively correlated to interest rates. But in 2025, gold has defied many longstanding historical norms and traditional benchmarks. Record-setting world debt and steady and consistent central bank demand have made it one of the best-performing assets of the year, exceeding projections and surpassing price targets. So, it's important to think carefully about gold beyond short-term market fluctuations, interest rate chatter and even potential tariffs because long term, it could become a go-to asset. The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation. Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?
Finextra
15-07-2025
- Business
- Finextra
UK updates on Digital Gilt Instrument pilot
In March 2025 the government announced the start of its procurement process for the Digital Gilt Instrument (DIGIT) Pilot. This first stage of the procurement process was the Preliminary Market Engagement Notice (PMEN), which sought views from potential suppliers and the wider financial services sector on the delivery of DIGIT. 0 This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author. This process closed in April, and the government has been carefully reviewing responses to inform its next steps. As was set out in the PMEN, the pilot aims to: enable the government to explore how distributed ledger technology (DLT) can be applied across the lifecycle of the UK sovereign debt issuance process. catalyse the development of UK based DLT infrastructure and the adoption of DLT in UK financial markets. The PMEN outlined an initial set of design decisions that had been taken to meet these aims, including that DIGIT will be digitally native, short-dated, issued on a platform operating within the Digital Securities Sandbox (DSS) and that the issuance will be separate from the government's debt issuance programme. Taking into account feedback from the PMEN responses, the government can today announce a further set of features that aim to be tested as part of the pilot: Delivering on-chain settlement. In line with the objective to test the full lifecycle of the UK sovereign debt issuance process, the government will prioritise solutions that allow DIGIT to be settled on DLT. This includes the cash leg of DIGIT transactions. Enabling settlement of over-the-counter trades. The ability to trade DIGIT between counterparties on a DLT platform is important for establishing an active market. This includes testing functionality of DLT compared to standard fixed income markets, such as the role smart contracts can play in over-the-counter trades. Supporting interoperability. Responses highlighted that a key barrier to adoption of DLT is that it could lead to a fragmented market. The government will look to work with industry, platform providers and existing market infrastructure providers to foster interoperability in supporting access to DIGIT from investors operating in both traditional and DLT markets. Deliver greater transparency. DLT platforms have the capability to provide greater visibility of securities ownership and other potential benefits. This is an important area where DLT can go beyond what is possible on existing infrastructure making it important to test how these benefits can be realised. The government also wants to work with the financial services sector to encourage ongoing development of additional DIGIT features and functionality. This includes supporting solutions that enable collateral mobility; examining the case for listings on DLT; and the development of secondary markets. It is the government's intention to engage with the Digital Markets Champion, a new role being created under the Wholesale Financial Markets Digital Strategy being published today, to develop a cross-sectoral strategy for delivering these features.[footnote 1] The government will appoint industry leads to these roles this Autumn. The government intends to set out further details on the pilot as a part of the next phase of the procurement process which will be published over the summer with a view to appointing suppliers later this year.
Irish Times
11-07-2025
- Business
- Irish Times
Ireland's €156bn tax windfall: Where has it gone?
The next financial crisis is coming and this time it will be a sovereign debt crisis. Not my words but those of German chancellor Friedrich Merz . Speaking before the German election in February, the one that elevated him to the top job, Merz warned that governments had taken on too much debt. He noted that several EU states, including France, Italy and Spain, now had debts that were bigger than the size of their annual economic output. The French government collapsed last year while trying to push through a €60 billion austerity budget in an attempt to rectify the problem. Merz could have added the United Kingdom to that financial risk list. British prime minister Keir Starmer's government is tearing itself apart trying to put the public finances on a more sustainable path, fearful of another bond market bust-up like the one that sunk former Tory prime minister Liz Truss. And then there is the United States and Donald Trump's 'big beautiful tax-cutting Bill', the biggest such Bill in US history, which is expected to add at least $3 trillion (€2.6 trillion) to the country's already eye-watering $37 trillion debt pile. Brewing fiscal crises are everywhere, stoking political tensions and populist backlashes This level of debt is bearing down on Washington like an asteroid, threatening the US's status as the world's backstop economy. The founder of the world's biggest hedge fund and author of a new book, How Countries Go Broke, The Big Cycle (which Minister for Finance Paschal Donohoe is reading), Ray Dalio believes the US is at an inflection point. [ Has Fingal County Council found a solution to our housing crisis? Opens in new window ] On the current trajectory, the interest payments on its national debt will exceed $1 trillion by 2026. Brewing fiscal crises are everywhere, stoking political tensions and populist backlashes – except in the plush, stucco-laden halls of the Department of Finance in Dublin, where a relative calm prevails. The Juggle: the issues facing women with young children when balancing childcare and their careers Listen | 44:30 Officials in Merrion Street operate at one remove from the financial zeitgeist. Their dilemma is not where to get the money but what to do with it. Since 2015, they've been love-bombed with tax receipts from corporate America. About €156 billion of corporate tax revenue has flowed into the Irish exchequer in just 10 years (including €11 billion of Apple tax money last year). A further €30 billion is expected this year. But just €16 billion of this tax gold rush, less than 10 per cent if you include the 2025 receipts, will have been saved by the end of this year (in the State's two sovereign wealth funds). The current crop of leaders might like to distance themselves from former Fianna Fáil minister for finance Charlie McCreevy's school of accountancy – 'if I have it, I'll spend it', he famously quipped. But the statistics do not lie. So, where has this financial largesse gone? According to the Irish Fiscal Advisory Council (Ifac) , there was one-off spending on the pandemic of €27.2 billion plus an additional €7.7 billion spent on cost-of-living supports in the last three budgets, adding up to €34.9 billion. The department disputes Ifac's numbers, claiming the outlay on these crises was €47 billion. There is disagreement on what constitutes temporary and permanent spending increases. But most of the excess receipts from corporate tax have disappeared into the budgetary ether, in some cases to paper over cracks in the State's health budget. Since 2015, the Republic's population has grown by almost 15% to 5.4m Donohoe can legitimately point to the fact that the State, the population and the draw on public services have grown substantially, requiring more budgetary resources. Since 2015, the Republic's population has grown by almost 15 per cent 5.4 million. He will argue that supporting workers, households and businesses during the pandemic and the subsequent cost-of-living crisis is precisely why the Irish economy is continuing to perform strongly and why unemployment remains anchored at a multidecade low of 4 per cent. The State's healthy cash balance has also been used to keep a lid on our national debt (€218 billion at the end of last year), a metric that has ballooned in other countries. But many economists, looking enviously at Norway's colossal $1.8 trillion sovereign wealth fund, still feel the Government's budgetary arithmetic is loose and want more of this windfall saved, fearful that it can't be relied on indefinitely. The International Monetary Fund warned this week that the big risk for the Republic in this period of trade fragmentation was not tariffs but 'foreign direct investment relocations'. In other words, a big multinational jumping ship. Based on the department's measurements, the windfall element of this corporate tax bonanza amounts to approximately €70 billion over 10 years. Saving that amount when the State has such a conspicuous infrastructural deficit would be a difficult political sell. That said, the Irish economy is running close to capacity and pushing too much money into the system all at once, no matter how noble the ambition, could overheat the economy, inflating prices in the process. Norway's sovereign wealth fund was in part established to shield that economy from the distortionary effects of 'supernormal tax receipts' The high cost of living here is, at least in part, linked to the large flow of money into the domestic economy from multinationals. Norway's sovereign wealth fund was in part established to shield that economy from the distortionary effects of 'supernormal tax receipts'. Unlike here, Norway's war chest is locked away from governments that might be tempted to weave it into their day-to-day spending plans. Saving more in the short term is not only necessary but will give us a potentially transformational level of wealth in the long term.
Bloomberg
10-07-2025
- Business
- Bloomberg
Japan's 20-Year Bond Sale Demand Lower Than 12-Month Average
Demand at Japan's 20-year government bond auction was lower than the average over the past 12 months, as an upcoming election highlights the likelihood that the nation's sovereign debt will keep rising. The average bid-to-cover ratio was 3.15, compared to the 12-month average of 3.29. The ratio was 3.11 for the last auction. In another sign of lackluster investor demand, the tail, or gap between average and lowest-accepted prices, was 0.18, compared with 0.28 at the previous sale.
