Greg Ip

Articles by The Economist’s U.S. Economics Editor

Sovereign-debt managers: Rollover roulette

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[Greg Ip] WHEN financial turmoil threatened to engulf Ireland last month, the government took an unusual step: it scrapped bond auctions for the rest of the year. The move was possible because the country has enough cash to last until next May.

Over the past two years Ireland’s National Treasury Management Agency (NTMA), which manages the state’s debt, has maintained a cash cushion of €20 billion ($27.7 billion), equivalent to 12% of GDP. It did the bulk of its borrowing through long-term bond auctions, resulting in a relatively long average maturity for the national debt. The IMF reckons that next year Ireland must finance the rich world’s largest budget deficit as a share of GDP. But it needs to refinance only a modest amount of maturing debt (see chart). In contrast, huge refinancing needs helped drive Greece into the arms of the fund and of its euro-zone peers in May.

The entire article is linked here.



Written by gregip

October 14, 2010 at 3:25 pm

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