(Agence Ecofin) – Countries’ needs for financial resources will be maintained in 2021, after a record year 2020. An opportunity for banks and investors. But for borrowers, it will all depend on market conditions
135 countries rated by S&P Global Ratings are expected to borrow $ 12.6 trillion this year 2021 from commercial creditors, we learn from an analysis produced by this institution, on March 2, 2021.
This sum is down by 20% compared to the record level of resources mobilized via this mechanism in 2020. But it remains 50% higher than the average borrowing of these States on the capital markets over the past decades.
“As a result, we forecast by the end of 2021 that the outstanding commercial debt of all the countries we assess will increase by 10% from 2020 to a record $ 67.5 trillion. At the same time, the stock of short-term commercial debt driven by the accelerated issuance of certain developed countries such as the United States will remain virtually unchanged in 2021 at $ 9.7 trillion ”, can we read in the analysis.
Even if it is in a smaller proportion, the investment banks of the world will still have in 2021, several opportunities to generate fees and commissions for the arrangement of loans on the issue of government securities, or by syndication.
The big question now is what interest rates will apply. It depends in principle on what will happen in the USA, Japan, but also UK, China, France, Italy, Spain and Germany which are the biggest borrowers among the countries.
In the United States, investors are attentive to the evolution of yields on 10-year government bonds. The certainty that President Joseph Biden’s $ 1900 billion bailout will pass, leads to speculation about a possible return of inflation; which would push interest rates up.
In this case, the loan bill will be high, especially for African countries. The 21 countries included in the S&P Global Ratings analysis plan to borrow $ 128.2 billion from private creditors. This is a little more than the $ 126.8 billion borrowed by these countries in 2020, and it represents 13% of the combined GDP of these countries.