{"text":[[{"start":10.14,"text":"Move over Piigs. The latest problem children of European debt markets, according to investors, are the “Bifs”: Britain, Italy and France."}],[{"start":20.880000000000003,"text":"The three economies suffered the biggest rises in borrowing costs among major European bond markets following the outbreak of war in the Middle East on February 28. "}],[{"start":33.31,"text":"Even after recovering some ground, yields on 10-year UK and Italian bonds, which move inversely to prices, are up at least 0.5 percentage points, while those on French bonds are 0.45 percentage points higher. German Bund yields are up 0.38 percentage points over the period."}],[{"start":55.410000000000004,"text":"The debt sell-off reflects investor fears that a prolonged period of high oil and gas prices will drive up inflation, and that the Bifs are among the worst-placed to fund higher spending on defence and energy."}],[{"start":70.14,"text":"“If you don’t have the money in the first place, you are going to come under particular pressure,” said Craig Inches, head of rates and cash at Royal London Asset Management, who coined the Bif term, adding this had caused the trio to trade more as a group."}],[{"start":88.43,"text":"“These countries may want to improve their energy and defence infrastructure, but will the markets allow them to, or at what cost?” he said."}],[{"start":98.33000000000001,"text":"The UK’s debt challenge was underscored by a record £15bn debt syndication on Tuesday, where it paid a yield of just above 4.91 per cent, the highest in any 10-year debt sale since 2008."}],[{"start":114.26000000000002,"text":"The new grouping has echoes of the so-called Piigs — Portugal, Ireland, Italy, Greece and Spain — a popular acronym during the European debt crisis more than a decade ago. Such countries at the time faced high debt, bad loans in the banking system and high borrowing costs, but have improved their finances in recent years."}],[{"start":null,"text":"
"}],[{"start":137.8,"text":"Measures such as Italy’s temporary cut to fuel excise taxes have prompted some investors to warn of a deterioration in Europe’s public finances, which could be compounded by any longer-term plans to spend more on energy independence or defence."}],[{"start":155.48000000000002,"text":"In the UK, a key government adviser warned on Tuesday that the war “has to be a rude wake-up call” for the country’s under-investment in its military. Some within the ruling Labour Party have pushed for a carve-out for extra military spending from the country’s borrowing limits."}],[{"start":174.13000000000002,"text":"Europe, as the world’s largest developed-market energy importer, is widely seen as particularly vulnerable to the fallout from the Iran war, with the likely additional spending coming on top of huge debt issuance as a result of the coronavirus pandemic that had already driven countries’ long-term borrowing costs higher."}],[{"start":196.28000000000003,"text":"The underperformance of Britain, Italy and France was “about relative strength going in” to the conflict, said Gordon Shannon, a fund manager at TwentyFour Asset Management. “When debt to GDP ratios are already stretched, this looks likely to increase fiscal strain.”"}],[{"start":215.82000000000002,"text":"France’s 10-year bond yield had already hit its highest level since 2011 last year, and last month rose to almost 3.89 per cent, its highest since the aftermath of the financial crisis in 2009. The 10-year gilt yield — higher than Eurozone counterparts due to sticky inflation and a higher central bank policy rate — reached nearly 5.12 per cent last month — its highest since 2008 — and is currently at about 4.8 per cent."}],[{"start":null,"text":""}],[{"start":248.92000000000002,"text":"Political risks in Britain and France have also pushed their borrowing costs higher, while Italy’s debt pile has long been a preoccupation for global bond investors. France’s wide deficit and recent political crisis have helped drive its borrowing costs up towards others previously viewed as part of the Eurozone so-called periphery of weaker borrowers."}],[{"start":274.70000000000005,"text":"The UK, meanwhile, has higher yields in part due to elevated political risks since the 2022 gilts crisis, as well as intermittent worries about a change of prime minister."}],[{"start":287.13000000000005,"text":"The correlation between gilt yields and Italian bonds has reached its highest in decades during the Iran war, according to FT analysis of LSEG data. The strength of this correlation was highly unusual, said Mike Riddell, a fund manager at Fidelity International, adding that “the two countries are perceived similarly in terms of their fiscal vulnerabilities”. "}],[{"start":311.58000000000004,"text":"France had “weathered the crisis better” than the other two, he added, but that might reflect investors’ bullishness on gilts and Italian debt ahead of the crisis. French debt, by contrast, had already underperformed other European markets in recent years."}],[{"start":328.06000000000006,"text":"Additional reporting by Emily Herbert"}],[{"start":339.66,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1776252440_8213.mp3"}