Asia Chart of the Week:Coz rates are low

By admin in 集团财经 on 2019年11月30日

Debt, you will have noticed, has climbed rapidly in recent years across
Asia (if youwonder how rapidly exactly, check out our latest regional
debt update, Higher Still).

    And yet, so far, financial systems show few signs of stress. There
are plenty ofreasons for this, including more stringent regulations than
in the past, plenty ofliquidity, and solid FX reserve buffers. But most
importantly: interest rates are stillextremely low. That means that the
rise in debt servicing costs has been a lot moremuted than in other
leverage cycles. Even the Fed’s three rate hikes over the pastsix months
haven’t changed the picture much: long-term US interest rates, andlocal
funding cost in most of Asia (though not necessarily China), have
actuallyfallen over the same period. That may not remain the case
forever. So it’s relevantto ask: what would happen to debt service
ratios if interest rates started to rise?Asia would suddenly face a
crippling jump in debt service costs, and at the veryleast have to
endure sharply slowing consumption and investment.
Fortunately,inflation, and therefore rates, look well contained globally
for now. But what if…


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