INTEREST RATE TRENDS
In addition to our regular monthly surveys of projections for over 90 currencies we also undertake a special survey of real interest rate trends in Foreign Exchange Consensus Forecasts (in May and November) for the countries listed below. We present consensus estimates of both short- and long-term interest rates.
| G7 & Western Europe |
Asia Pacific | Eastern Europe |
|---|---|---|
| United States | Australia | Czech Republic |
| Japan | India | Hungary |
| United Kingdom | Indonesia | Poland |
| Canada | New Zealand | |
| Euro zone | Taiwan | |
| Norway | Thailand | |
| Sweden | ||
| Switzerland |
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The table and text commentary below represent a small portion of this special survey taken from our November 2011 issue of Foreign Exchange Consensus Forecasts.
| Long Term Interest Rates (% pa) Consensus Forecasts | ||||
| All yields as of Nov. 14, 2011 | 10-Yr Government or Treasury Bond | Latest | Forecasts | |
| In 3 months | In 12 months | |||
| Australia | 5.80%, May 2021 | 4.1 | 4.5 | 4.9 |
| Japan | 1.10%, September 2021 | 1.0 | 1.1 | 1.2 |
| Italy | 4.67%, September 2021 | 6.7 | 5.0 | 4.9 |
| Spain | 5.50%, April 2021 | 6.1 | 5.0 | 4.9 |
| UK | 3.75%, September 2020 | 2.2 | 2.5 | 2.9 |
| United States | 2.13%, April 2021 | 2.0 | 2.3 | 2.8 |
Unpredictable political developments in the euro zone continue to hamper the regional economic outlook. A sudden crisis in confidence in Italy last week raised fears about contagion spreading to France and cast doubt over the deficit-reduction targets in Spain. The premium demanded on debt from these countries is higher than a year ago and approaching 7% in some, the level that forced Greece, Ireland and Portugal to accept emergency bailouts from the EU and IMF. Yields, of course, are influenced by creditworthiness and default risks, which partly reflect policy and growth expectations. The European Central Bank, under new leadership, has reluctantly continued its unorthodox purchases of sovereign bonds to stabilise financial conditions. Yet its efforts have been hampered by political difficulties and regional divergences, which are underlined in the wide EMU bond spreads (table above). The cost of new borrowing in Germany is almost 500 basis points lower than that of Italy, as it is considered a much safer investment. In addition, it is not just more productive and financially prudent countries that have benefited from low sloping yield curves. The return demanded on UK bonds, which is inversely related to its price, is well below the European average despite large imbalances of its own, due to confidence in their reliability and the early adoption of fiscal austerity by the UK government.
A portion of the analysis from Foreign Exchange Consensus Forecasts, November 14, 2011