Why do bond markets matter?

Предыдущая 1 2 3 456 7 8 9 10 11 12 Следующая

Because they determine what it costs a government to borrow. When a government wants to raise new money, it issues new bonds, and has to pay an interest rate on those bonds that is acceptable to the market. The yield at which the market is buying and selling a government's existing bonds gives a good indication of how much interest the government would have to pay if it wanted to issue new bonds. So, for example, Spanish 10-year bond yields have risen above 6% in recent years. That means that if the Spanish government wants to borrow new money from the bond market for 10 years, it would have to pay an interest rate on the new bond of more than 6%.

So what is a eurobond?

A eurobond would operate in exactly the same way as a government bond, except that all member states of the eurozone would collectively guarantee the debt rather than a single government.

There are, however, many important questions about how a eurobond might work that remain to be answered. For example, if one government could not pay its share of the bond payments, would the other governments step in and make the payments on its behalf? Would the government that got into trouble be required to prioritise its eurobond payments over its other debts?

How might a eurobond solve the crisis?

During the financial crisis, investors have been much less willing to buy the bonds of troubled southern European countries, and much more willing to buy the bonds of Germany and some other financially stronger countries. That has made it much cheaper for Germany to borrow, and very expensive for Greece, the Irish Republic and Portugal to borrow. Introducing eurobonds would level the playing field - all governments would be able to borrow at the same interest rate.

Why does Germany object to eurobonds?

Germany has three basic objections. First of all, the Germans do not see why they should be on the hook for all of the debts racked up by their southern neighbours. Secondly, it may make it more expensive for Germany to borrow, because markets may consider the eurozone as a whole to be a more risky borrower than the financially strong Germans on their own. Thirdly, the German government is afraid that if they guarantee the debts of their eurozone neighbours, that will simply encourage the southern Europeans to borrow and spend more freely, making their debts even bigger.

What about "project bonds"?

These would be issued by the European Commission. The borrowed money would be spent by the Commission on infrastructure and other growth-enhancing investments, and it would ultimately be responsible for repaying the project bonds.

They would be similar to eurobonds to the extent that the EU governments are collectively bound to support the Commission and make sure that it can repay the debts. However, the amount of money involved in the project bonds would be far smaller than what is envisioned by the advocates of eurobonds. The Commission's entire budget is equivalent to about 1% of the EU's GDP, whereas most EU government budgets are equivalent to about 50% of their respective GDPs.

I. Vocabulary:

government bonds – государственные облигации

issue bonds – выпускать долговые обязательства, облигации

gather momentum – набирать силу, наращивать скорость

backer, advocate – сторонник

given that … – учитывая, что…

reduce the resolve – уменьшить решимость

highly-indebted governments – правительства стран с высоким уровнем задолженности

balance one’s budget – сбалансировать бюджет

IOU – долговая расписка

pay a fixed rate of interest over a specific period – выплачивать фиксированную процентную ставку в течение определенного периода времени

repay the cash – рассчитываться по облигациям

cancel the government debt – погасить государственный долг

ultra-safe long-term investment – абсолютно надежные долгосрочные инвестиции

raise funds, raise money- привлекать средства

collect the interest – получить проценты

fluctuate – колебаться ( о цене)

make the annual interest payments – выплачивать ежегодные проценты

maturity – срок платежа, дата погашения

bond yield – доходность облигации

return on the investment – доход на инвестиции

eurobond – еврооблигация

on smb’s behalt – зд. за к-л

prioritise Eurobond payments over other debts – погасить еврооблигации в первоочередном порядке

level the playing field – предоставить всем равные условия

be on the hook – “быть на крючке”

rack up debts – набирать долги

project bonds – проектные облигации, облигации под конкретные проекты, выпускаемые Еврокомиссией

spend money on infrastructure and other growthenhancing investments – тратить средства на инфраструктуру и другие проекты, стимулирующие рост экономики

envision - предусматривать