Gloom descends on sovereign debt

Research Recap submits: In the absence of sustained economic recovery and fiscal consolidation, Japan’s government debt will continue to rise, placing downwards pressure on sovereign credit and ratings over the medium term, according to Fitch Ratings.

Helmut Reisen, 19 May 2010Credit rating agencies have recently downgraded Greek, Portuguese, and Spanish sovereign debt, causing unrest among Europe’s leaders. This column argues that unless sovereign ratings can be turned into proper early warning systems, they will continue to increase instability and volatility and to undermine the benefits of capital markets.

Fitch Ratings on Thursday affirmed its sovereign credit ratings for China, citing the country's exceptional financial position, its recent economic performance and low government debt levels.The firm called China's estimated 8.4 percent growth in 2009 impressive amid a global recession, but warned economic conditions in the country had increased imbalances in the economy and risks in the banking system.

Kevin Grewal submits: As the sovereign debt crisis continues to take its toll on Europe and fails to go away, currencies continue to deteriorate, government bond yields continue to rise and stock markets remain volatile. Depsite the fear that this crisis has brought on, there are four ways one can play it. JapanComplete Story »

Mathias Hoffmann, 20 March 2010If a European Monetary Fund does happen, how would it work? This column proposes a European Sovereign Insurance Scheme to sell bond insurance on EMU members' sovereign debt. In good times the insurance fees would allow the EMF to build up a capital cushion. In bad times, the EMF could use these funds to facilitate an orderly unwinding of the default – while imposing tough conditions.Full Article: How Europe should harness market forces to deal with sovereign credit risk

The fund says that a healthier world economy and better financial conditions have reduced banks’ need to write down assets but sovereign debt problems may be spreading

AP - Fitch Ratings agency says it has downgraded Portugal's sovereign debt amid growing concerns about the government's ability to service its borrowings.

Buying into the debt of Europe’s troubled companies might not seem an easy way to make money amid a sovereign debt crisis, but fund managers are finding it hard to resist