Financial Times headline: Debt defaults start to loom more over markets
Sub-headline: Rising cost of capital will expose strains in the financial system
". . . Meanwhile, a lot of bond investors have a different matter on their minds: defaults. These have been something of a rarity while central banks have flooded the system with free money, but failures by governments and companies to pay back what they owe are expected to become much more frequent.
In government debt this could get very tricky, particularly for those countries that have borrowed in dollars that are now much more expensive to pay back. Leland Goss, general counsel at the International Capital Markets Association, pointed out in a recent report that even in the decade before Covid struck, borrowing in emerging markets grew from $3.3tn, or about a quarter of economic output, to $5.6tn, almost a third.
Strain is beginning to show in Sri Lanka, which has already admitted it cannot pay investors back, but also in bonds issued by Kenya, Egypt and elsewhere. The prospect of a “possibly systemic sovereign debt crisis” is real, Goss said."