Regional government bond issues in 2010

Judit Hevér – Gábor Orbán
junior analyst - macroeconomic analyst and bond portfolio manager

With the steep rise in public debt throughout the world over the past year, management of the global financial crisis is carrying a high price. Due to the recession tax bases have shrunk, while unemployment benefit-related expenditures have soared. Restructuring of debt related to the reorganization of the financial sector and discretionary measures taken to invigorate the economy are further increasing debt burdens. Moreover, all this comes at a time when much of the developed world and the majority of emerging countries (excluding the American continent and the Middle East) are already struggling with long-term fiscal crises due to the financial imbalance brought on by the ageing of their societies. Government bond issuance in Germany is double that of last year, while Greece’s serious financing difficulties have raised the spectre of sovereign bankruptcy on the horizon in the developed market, and in time other developed countries may follow.

In this environment, the countries of the Central and East European region must compete for the favours of investors and offer attractive conditions for the sale of their bonds. So how much pressure should we fear on the supply side? Below we will examine the bond issuance plans of three of the Visegrád countries, from which we will attempt to extrapolate the likely tensions between supply and demand in the year ahead.

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