Fixed-Income Markets for the rest of 2021

Due to the pandemic measures, governments have borrowed too much, but so have businesses, with very low borrowing costs due to low interest rates. However, both the low interest rates on the bonds and their yields create an ever-increasing climate of concern for a possible “explosion” of collapse.

Debts of non-financial corporations in developed economies increased from 165% of GDP (2019) to 185% of GDP (2020) (Source: Bank of International Settlements). The corresponding figures for emerging economies from 147% of GDP (2019) to 173% of GDP (2020).

Rising debt levels create conditions of high budget vulnerability and the viability of borrowers from possible interest rate hikes. In such a situation, due to persistently high inflation (> 2%) there will be a tsunami of bankruptcies of businesses and households.

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