As households are supposedly deleveraging and European nations face austerity, one might suspect that global debt levels were stabilizing or even dropping. Think again. It will likely come as no surprise when we point out that the G-7 nations alone face a massive $7.3 Trillion (with a T) of sovereign-only maturities (and a further $566 Billion in interest payments) in 2012 alone. This incomprehensible number is worsened only in historical comparison as it's current level is 125% higher than was 'expected' at the end of 2010 (and 238% higher than was expected for 2012 at the end of 2009). As Bloomberg points out, Japan tops the list with $3.05tn (equivalent) followed the US at $2.76tn for 2012 as the former peaks in March 2012 (with $678bn due in that month alone) and the latter peaks in this month with January 2012 seeing over $480bn due to mature (and be rolled). But it gets worse for supply - global corporations (dominated by Financials relative to non-Financials), as noted by S&P today, have used the low interest rate environment to modestly relever and face almost $1 Trillion (again with a T) of maturing debt that will need to be rolled in 2012 (with January and March also topping the list) and over $3.1Tn in the next four years. So in the next four years, amid a slowing demand picture thanks to European worries, global corporate debt combined with G-7 sovereign debt maturing is an incredible $18.48 Trillion that will need to be rolled, rehypothecated, and have capital allocated to it (or not).
Debt loads are piling up in shorter and shorter maturities for the G-7.
...and from the end of 2009, expectations for 2012's debt load (maturing and needing to be rolled) has increased dramatically...
Breaking down the $7.3 trillion equivalent debt maturities for the G-7 across the year, we see January and March as critical...
Obviously Sovereign issuance dominates Corporate issuance but European New Bond Issuance for 2011 was dwindling as we ended the year...
which worries S&P greatly:
European Corporate Issuance Volume Remains Thin, Reflecting Continued Investor Worry
New corporate bond issuance in Europe continues to be very thin, reflecting the economic uncertainty that has characterized the region for the past few months. New deals through the first half of December totaled $20 billion. Of this, 85% were investment grade and 15% were not rated; there were no speculative-grade deals. In addition, the number of European companies issuing debt outside of Europe has increased, demonstrating difficulty in securing capital from within the region.
In November, the total new bond issuance in Europe was $43 billion. About 10% of this total is attributable to the European Financial Stability Facility (EFSF), an entity created to safeguard financial stability in Europe by providing financial assistance to member states.
As they see huge amounts of financial and non-financial debt needed to be rolled over the next few years...
All-in-all, the debt loads are becoming awesome and face what Bloomberg describes as a bad combination:
“The buyer base for peripheral Europe has obviously shrunk at the same time that the supply coming to the market is increasing, which is not a good combination,” said Michael Riddell, a London-based fund manager at M&G Investments.
but we agree with the following that it will be mid-year (March onwards) that the real problems of excess supply hit (and pre-judging when this gets (or how much of this is) priced into forwards is anyone's guess):
Investors should be most worried about the period after the ECB’s second three-year longer-term refinancing operation scheduled in February, according to Ignis’s Thomson.
“The amount of liquidity that has been supplied by central banks, with more to come from the ECB in February, suggests the first couple of months will be a sort of phony war as far as the supply is concerned,” Thomson said.