Political risk on the rise for bondholders

With governments in the developed world continuing to shoulder the liabilities of once-private debt, wrestling with deficit reduction plans and pushing ahead with changes to global financial regulations, investors need to adjust for the growing role of politics in today’s markets. Credit reports on the key risks for bondholders.

Seat of power: Growing politicisation of the financial world

Debt burdens the developed world. Much of that debt was originally in private hands, from mortgages in the US and Spain to easy credit in Ireland, although there were also governments whose fiscal deficits yawned dangerously wide, notably the government of Greece.

That public/private distinction has become increasingly blurred since the global financial crisis, thanks to the actions of governments to support or even underwrite their financial sectors, and to prop up other debt-strained sectors of