Notice anything about the below chart, from RBC Capital Markets’ Richard McGuire?
The graph plots the 11 largest eurozone members — plus the UK — according to their expected stock of debt and structural budget deficit. It’s meant to capture “market concern” over the size of the countries’ debt liabilities and the pace at which the debt burden is rising.
So Finland, at the bottom left of the chart, would be in the best position, with a low stock of debt plus a limited budget shortfall. In contrast, Italy has the highest stock of debt in the region but a relatively modest deficit. The UK, however, is clearly out on a limb in terms of its liabilities.
Which means, according to RBC:
. . . the UK appears the richest of any of the countries viewed here which makes intuitive sense given the scale of its budgetary shortfall, the yield compression that, until recently, was being affected via QE and the fact that, unlike the Eurozone periphery, the UK cannot hope for a bailout from its peers but can look for assistance in the form of a weaker currency.
Richest, in this sense, is a bad thing.
Pangs of gilt(s), redux – FT Alphaville
Pangs of gilt(s) – FT Alphaville
Next to the trough – FT Alphaville
Nowotny talks contagion, exit strategies and all things peripheral – FT Alphaville interview