Saturday, March 20, 2010

PIIGS Debt Coming Due: Is it really an issue?

Der Spiegel published the following graph as part as the ongoing Portugal / Greece / Italy / Ireland / Spain crisis porn.

Let's not all just freak out just yet. Let's do our homework:

As of this writing the PIIGS are borrowing ta the following rates (Economist 3/20 -3/26):
  • Portugal: ??
  • Ireland: ??
  • Italy: 3m @ 64bp and 10y @ 390bp
  • Greece: 3m @64bp and 10y @594bp
  • Spain: 3m @ 66bp and 10y @ 384bp
The economist also tells us that the average maturity of this debt stands as follows

  • Portugal: 6.5 years
  • Ireland: 6.8 years
  • Italy: 7.2 years
  • Greece: 7.7 years
  • Spain: 6.7 years
Now, what I'd like to know is when this debt coming due was issued and at what cost to the government. If the yield at issue was higher than their current borrowing rates, well, that's not really a problem. Second, who owns all this debt? The local banks? foreign banks? regular people? If it's mostly local banks that hold this debt, i don't imagine the refinancing is going to be much of an issue, after all, the banks have to do something with that cash. Could rates move up as the supply of debt overwhelms the demand? Yes. Do I think this is as big of a deal as it is being painted to be? Hell no.

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