Latest news with #sovereigndebt
Finextra
15-07-2025
- Business
- Finextra
UK updates on Digital Gilt Instrument pilot
In March 2025 the government announced the start of its procurement process for the Digital Gilt Instrument (DIGIT) Pilot. This first stage of the procurement process was the Preliminary Market Engagement Notice (PMEN), which sought views from potential suppliers and the wider financial services sector on the delivery of DIGIT. 0 This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author. This process closed in April, and the government has been carefully reviewing responses to inform its next steps. As was set out in the PMEN, the pilot aims to: enable the government to explore how distributed ledger technology (DLT) can be applied across the lifecycle of the UK sovereign debt issuance process. catalyse the development of UK based DLT infrastructure and the adoption of DLT in UK financial markets. The PMEN outlined an initial set of design decisions that had been taken to meet these aims, including that DIGIT will be digitally native, short-dated, issued on a platform operating within the Digital Securities Sandbox (DSS) and that the issuance will be separate from the government's debt issuance programme. Taking into account feedback from the PMEN responses, the government can today announce a further set of features that aim to be tested as part of the pilot: Delivering on-chain settlement. In line with the objective to test the full lifecycle of the UK sovereign debt issuance process, the government will prioritise solutions that allow DIGIT to be settled on DLT. This includes the cash leg of DIGIT transactions. Enabling settlement of over-the-counter trades. The ability to trade DIGIT between counterparties on a DLT platform is important for establishing an active market. This includes testing functionality of DLT compared to standard fixed income markets, such as the role smart contracts can play in over-the-counter trades. Supporting interoperability. Responses highlighted that a key barrier to adoption of DLT is that it could lead to a fragmented market. The government will look to work with industry, platform providers and existing market infrastructure providers to foster interoperability in supporting access to DIGIT from investors operating in both traditional and DLT markets. Deliver greater transparency. DLT platforms have the capability to provide greater visibility of securities ownership and other potential benefits. This is an important area where DLT can go beyond what is possible on existing infrastructure making it important to test how these benefits can be realised. The government also wants to work with the financial services sector to encourage ongoing development of additional DIGIT features and functionality. This includes supporting solutions that enable collateral mobility; examining the case for listings on DLT; and the development of secondary markets. It is the government's intention to engage with the Digital Markets Champion, a new role being created under the Wholesale Financial Markets Digital Strategy being published today, to develop a cross-sectoral strategy for delivering these features.[footnote 1] The government will appoint industry leads to these roles this Autumn. The government intends to set out further details on the pilot as a part of the next phase of the procurement process which will be published over the summer with a view to appointing suppliers later this year.
Irish Times
11-07-2025
- Business
- Irish Times
Ireland's €156bn tax windfall: Where has it gone?
The next financial crisis is coming and this time it will be a sovereign debt crisis. Not my words but those of German chancellor Friedrich Merz . Speaking before the German election in February, the one that elevated him to the top job, Merz warned that governments had taken on too much debt. He noted that several EU states, including France, Italy and Spain, now had debts that were bigger than the size of their annual economic output. The French government collapsed last year while trying to push through a €60 billion austerity budget in an attempt to rectify the problem. Merz could have added the United Kingdom to that financial risk list. British prime minister Keir Starmer's government is tearing itself apart trying to put the public finances on a more sustainable path, fearful of another bond market bust-up like the one that sunk former Tory prime minister Liz Truss. And then there is the United States and Donald Trump's 'big beautiful tax-cutting Bill', the biggest such Bill in US history, which is expected to add at least $3 trillion (€2.6 trillion) to the country's already eye-watering $37 trillion debt pile. Brewing fiscal crises are everywhere, stoking political tensions and populist backlashes This level of debt is bearing down on Washington like an asteroid, threatening the US's status as the world's backstop economy. The founder of the world's biggest hedge fund and author of a new book, How Countries Go Broke, The Big Cycle (which Minister for Finance Paschal Donohoe is reading), Ray Dalio believes the US is at an inflection point. [ Has Fingal County Council found a solution to our housing crisis? Opens in new window ] On the current trajectory, the interest payments on its national debt will exceed $1 trillion by 2026. Brewing fiscal crises are everywhere, stoking political tensions and populist backlashes – except in the plush, stucco-laden halls of the Department of Finance in Dublin, where a relative calm prevails. The Juggle: the issues facing women with young children when balancing childcare and their careers Listen | 44:30 Officials in Merrion Street operate at one remove from the financial zeitgeist. Their dilemma is not where to get the money but what to do with it. Since 2015, they've been love-bombed with tax receipts from corporate America. About €156 billion of corporate tax revenue has flowed into the Irish exchequer in just 10 years (including €11 billion of Apple tax money last year). A further €30 billion is expected this year. But just €16 billion of this tax gold rush, less than 10 per cent if you include the 2025 receipts, will have been saved by the end of this year (in the State's two sovereign wealth funds). The current crop of leaders might like to distance themselves from former Fianna Fáil minister for finance Charlie McCreevy's school of accountancy – 'if I have it, I'll spend it', he famously quipped. But the statistics do not lie. So, where has this financial largesse gone? According to the Irish Fiscal Advisory Council (Ifac) , there was one-off spending on the pandemic of €27.2 billion plus an additional €7.7 billion spent on cost-of-living supports in the last three budgets, adding up to €34.9 billion. The department disputes Ifac's numbers, claiming the outlay on these crises was €47 billion. There is disagreement on what constitutes temporary and permanent spending increases. But most of the excess receipts from corporate tax have disappeared into the budgetary ether, in some cases to paper over cracks in the State's health budget. Since 2015, the Republic's population has grown by almost 15% to 5.4m Donohoe can legitimately point to the fact that the State, the population and the draw on public services have grown substantially, requiring more budgetary resources. Since 2015, the Republic's population has grown by almost 15 per cent 5.4 million. He will argue that supporting workers, households and businesses during the pandemic and the subsequent cost-of-living crisis is precisely why the Irish economy is continuing to perform strongly and why unemployment remains anchored at a multidecade low of 4 per cent. The State's healthy cash balance has also been used to keep a lid on our national debt (€218 billion at the end of last year), a metric that has ballooned in other countries. But many economists, looking enviously at Norway's colossal $1.8 trillion sovereign wealth fund, still feel the Government's budgetary arithmetic is loose and want more of this windfall saved, fearful that it can't be relied on indefinitely. The International Monetary Fund warned this week that the big risk for the Republic in this period of trade fragmentation was not tariffs but 'foreign direct investment relocations'. In other words, a big multinational jumping ship. Based on the department's measurements, the windfall element of this corporate tax bonanza amounts to approximately €70 billion over 10 years. Saving that amount when the State has such a conspicuous infrastructural deficit would be a difficult political sell. That said, the Irish economy is running close to capacity and pushing too much money into the system all at once, no matter how noble the ambition, could overheat the economy, inflating prices in the process. Norway's sovereign wealth fund was in part established to shield that economy from the distortionary effects of 'supernormal tax receipts' The high cost of living here is, at least in part, linked to the large flow of money into the domestic economy from multinationals. Norway's sovereign wealth fund was in part established to shield that economy from the distortionary effects of 'supernormal tax receipts'. Unlike here, Norway's war chest is locked away from governments that might be tempted to weave it into their day-to-day spending plans. Saving more in the short term is not only necessary but will give us a potentially transformational level of wealth in the long term.
Bloomberg
10-07-2025
- Business
- Bloomberg
Japan's 20-Year Bond Sale Demand Lower Than 12-Month Average
Demand at Japan's 20-year government bond auction was lower than the average over the past 12 months, as an upcoming election highlights the likelihood that the nation's sovereign debt will keep rising. The average bid-to-cover ratio was 3.15, compared to the 12-month average of 3.29. The ratio was 3.11 for the last auction. In another sign of lackluster investor demand, the tail, or gap between average and lowest-accepted prices, was 0.18, compared with 0.28 at the previous sale.
Zawya
09-07-2025
- Business
- Zawya
Bank of England sees ongoing financial stability risks from global tensions
LONDON - Risks to financial markets remain high despite an easing of tensions after the United States paused implementing tariffs announced in April, the Bank of England said on Wednesday. The British central bank said it continued to see dangers from "geopolitical tensions, global fragmentation of trade and financial markets and pressures on sovereign debt" in a half-yearly assessment of threats to financial stability. "The risk of sharp falls in risky asset prices, abrupt shifts in asset allocation and a more prolonged breakdown in historical correlations remains high," the BoE's Financial Policy Committee said. Global share prices tumbled at the start of April and British 30-year government borrowing costs rose to their highest since the late 1990s after President Donald Trump announced wide-ranging tariffs on exports to the United States. While share prices have largely recovered, bond markets remain nervous about the scale of future borrowing possible in the United States, Britain and elsewhere. Last week British bond prices fell sharply after the government had to scale back plans to cut welfare payments in the face of parliamentary opposition and doubts briefly swirled about the future of finance minister Rachel Reeves. On Tuesday, Britain's Office for Budget Responsibility described the country's public finances as being in a "relatively vulnerable position" after the COVID-19 pandemic and that the government had failed to scale back spending since. The BoE said Britain's government bond market had functioned efficiently during market tension in April, but noted that the external stress was relatively short-lived. "Conditions might have become more strained had the episode of volatility lasted longer," the BoE said. The central bank said it was releasing more data on aggregate market positions so firms could better guard against risks. British households and businesses overall remained resilient and the domestic banking system was well placed to keep lending even if there was a sharp economic deterioration, it said. As a result, there were no domestic reasons to change the counter-cyclical capital buffer from 2%, the FPC said. The CCyB is varied over the credit cycle to ensure banks build up a cushion against future losses during good times and are able to keep lending during a downturn. (Reporting by David Milliken and Lawrence White)
Reuters
09-07-2025
- Business
- Reuters
Bank of England sees ongoing financial stability risks from global tensions
By David Milliken and Lawrence White LONDON, July 9 (Reuters) - Risks to financial markets remain high despite an easing of tensions after the United States paused implementing tariffs announced in April, the Bank of England said on Wednesday. The British central bank said it continued to see dangers from "geopolitical tensions, global fragmentation of trade and financial markets and pressures on sovereign debt" in a half-yearly assessment of threats to financial stability. "The risk of sharp falls in risky asset prices, abrupt shifts in asset allocation and a more prolonged breakdown in historical correlations remains high," the BoE's Financial Policy Committee said. Global share prices tumbled at the start of April and British 30-year government borrowing costs rose to their highest since the late 1990s after President Donald Trump announced wide-ranging tariffs on exports to the United States. While share prices have largely recovered, bond markets remain nervous about the scale of future borrowing possible in the United States, Britain and elsewhere. Last week British bond prices fell sharply after the government had to scale back plans to cut welfare payments in the face of parliamentary opposition and doubts briefly swirled about the future of finance minister Rachel Reeves. On Tuesday, Britain's Office for Budget Responsibility described the country's public finances as being in a "relatively vulnerable position" after the COVID-19 pandemic and that the government had failed to scale back spending since. The BoE said Britain's government bond market had functioned efficiently during market tension in April, but noted that the external stress was relatively short-lived. "Conditions might have become more strained had the episode of volatility lasted longer," the BoE said. The central bank said it was releasing more data on aggregate market positions so firms could better guard against risks. British households and businesses overall remained resilient and the domestic banking system was well placed to keep lending even if there was a sharp economic deterioration, it said. As a result, there were no domestic reasons to change the counter-cyclical capital buffer from 2%, the FPC said. The CCyB is varied over the credit cycle to ensure banks build up a cushion against future losses during good times and are able to keep lending during a downturn. (Reporting by David Milliken and Lawrence White) (( opens new tab; +44 20 7513 4034)) Keywords: BRITAIN BOE/
