Sovereign debt markets to deepen in Asia-Pacific, S&P report says

By Jennifer Chiou

New York, Jan. 26 - Sovereign debt markets will continue to deepen in the Asia-Pacific region during 2007, albeit at a slower pace than in recent years, according to an Standard & Poor's report titled "Asia-Pacific Sovereign Debt Will Exceed US$10 Trillion In 2007."

S&P noted that outstanding commercial debt of sovereigns in Asia-Pacific is likely to increase and breach the $10 trillion mark for the first time.

Of the 21 sovereigns rated, 13 are projected to record increases in debt in dollar terms, while five are projected to reduce sovereign commercial debt and three are forecast to remain at zero commercial debt outstanding.

"The Asia-Pacific region accounts for almost 40% of global sovereign debt outstanding and Japan will maintain its position as the dominant borrower in Asia-Pacific with over 80% of expected debt stock in 2007," said S&P credit analyst Brendan Flynn in the report.

"Similarly, sovereign commercial borrowing globally is projected to be just over $4 trillion in 2007, of which Asia-Pacific will account for 37%.

"Domestic borrowing will remain the preferred funding source in the region, with an ever decreasing reliance on external debt," Flynn added in the report.

Secondary credit analysts for the report included YeeFarn Phua and Elena Okorotchenko.

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