In this piece, we will take a look at the fifteen countries with the highest bond yields. For more countries, head on over to 5 Countries With The Highest Bond Yields.
If there's one market that can rightly be said to control the global financial system and influence national governments, it is the bond market. In the public imagination, it is the stock market that carries the most weight, simply because companies are more popular and mass media chooses to focus on the effects of corporate decision making, and titans such as Mr. Elon Musk, on share prices. Amidst this coverage, the bond market generally goes unnoticed, dominating the frame quietly as most people would fall into a deep slumber before they got through to concepts such as a yield, a credit default swap, and inverted yield curves.
The bond market has been in the news throughout 2022 as tech stocks like Amazon.com, Inc. (NASDAQ:AMZN), Meta Platforms Inc (NASDAQ:META) and Tesla Inc (NASDAQ:TSLA) took a tumble and the Fed started increasing interest rates. Given the tumultuous year that 2022 has been, a perfect example of the influence of the bond market that leaves even the most advanced and powerful countries subject to its whims is that of the United Kingdom. The government of former British prime minister Ms. Mary Elizabeth Truss aimed to come out full swing with an ambitious growth plan to lift her country from stagnation and on the path to growth. Ms. Truss' economic plan, dubbed a mini budget, promised large tax cuts and huge government spending that aimed at uplifting investor sentiment and providing support to business growth. However, what followed immediately after the announcement could not have been imagined by the former premier in her worst nightmares.
Just as her plan was announced, the bond market delivered its verdict. The U.K., which is a net importer, imports more goods than it exports, which then causes it to rely heavily on selling bonds to fund its fiscal deficit. The interest on these bonds is paid through taxes raised by His Majesty's Treasury, and more spending and lower taxes mean that bond investors worry about their returns. In the aftermath of the now historic announcement (for all the wrong reasons), the U.K.'s bond yields jumped to the highest levels since the 2008 financial crisis and sat at 4.503% after jumping by a shocking 0.44% or 44 basis points. The yields of a bond are the interest that it pays, and higher yields signify greater risk. This led to capital fleeing the U.K., which then drove down the British Pound's value to a historic, all time low of $1.03.
How did this influence the U.K. government, which is in charge of one of the world's most prosperous countries? Well, anarchy on the island was over within weeks as Ms. Truss submitted her resignation after her long time ally, the Chancellor of the Exchequer, Mr. Kwasi Kwarteng, resigned. Mr. Kwarteng was replaced by Jeremy Hunt, and after the bond markets once again gave their verdict, the British Pound has since stabilized.
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In terms of figures, the global government and investment grade corporate debt securities market is worth a whopping $59.2 trillion as of November 2022, with bonds rebounding and adding $2.8 trillion in value in November.
Our Methodology
We took a look at the global bond market and sifted out the countries with the highest yields. As a refresher, higher yields signify greater risk, with investors demanding larger sums to compensate for the risk that they are taking. Data for the piece comes courtesy of Tradingeconomics.com and Worldgovernmentbonds.com. Values for GDP are provided in Purchasing Power Parity (PPP) terms.
15. United Mexican States (Mexico)
10 Year Bond Yield as of November 30th, 2022: 9.642%
United Mexican States (Mexico) has the 15th largest economy in the world which is worth $2.9 trillion. The country has benefited through its proximity to the United States, as trade agreements such as the North American Free Trade Agreement (NAFTA) have led American companies such as automakers to shift their production to Mexico in order to be able to benefit from low labor rates. The country's gross domestic product (GDP) per capita was $10,166 in 2022, and the services segment accounted for the largest chunk of the economy by standing at 64.5%. The U.S. was Mexico's primary export partner in 2019, accounting for more than half of the exports.
14. Russian Federation
10 Year Bond Yield as of November 30th, 2022: 10.110%
Russian Federation is one of the few countries in the world that spans across continents, as it is located in both Europe and Asia. Its capital Moscow is the largest city in Europe. Russia's GDP stood at $4.65 trillion in 2022, and its GDP per capita is close to $32,000. The Russian economy is the sixth largest in the world, and the country is rich in mineral resources which it exports all over the world. The country's primary export partners are the United Kingdom and the European Union - both of which have suffered heavily this year due to Russia's invasion of Ukraine.
13. Republic of South Africa (RSA)
10 Year Bond Yield as of November 30th, 2022: 10.235%
The Republic of South Africa (RSA) is a former British colony that fully gained independence from the United Kingdom in 1931. The country has the third largest economy in Africa, which was worth $1.2 trillion in 2022 for a GDP per capita of $20,573.The Republic of South Africa (RSA) has a large and diversified economy, which sees it benefit from a plethora of natural resources, agriculture, manufacturing, information technology, telecommunications, and textiles. The bulk of South Africa's exports come through precious metals and stones, such as gold and diamonds.
12. Republic of Türkiye
10 Year Bond Yield as of November 30th, 2022: 10.560%
The Republic of Türkiye, commonly known as Turkey, is another transcontinental country, with parts located in both Europe and Asia. The country's economy is powered by tourism, infrastructure, and science and technology. Its economy is worth $3.22 trillion, with GDP per capita standing at $38,759. Republic of Türkiye's exports were $225 billion as of 2021, as it sold transportation equipment, machinery, apparel, electronics, and textile to a variety of different countries. The largest trading partner was Germany, and like several other countries, the Republic of Türkiye was also running a current account deficit as its imports were higher than its exports. However, compared to some countries higher up on our list, the deficit was relatively small and stood at 1.74% of the GDP.
In 2022, as inflation became rampant, and Federal Reserve started to raise interest rates, causing many tech stocks like Amazon.com, Inc. (NASDAQ:AMZN), Meta Platforms Inc (NASDAQ:META) and Tesla Inc (NASDAQ:TSLA) to crash. Many central banks adopted the policy of rates hikes, except Türkiye, where the government insists on keeping the rates unchanged.
11. Republic of Namibia
10 Year Bond Yield as of November 30th, 2022: 11.755%
The Republic of Namibia is a South African country that was a former territory of the Republic of South Africa (RSA). The country gained its independence in 1990, after fighting a bloody war for independence that left thousands dead. Its economy relies on oil and gas, diamonds, tourism, mining, agriculture, and water supply, with the Republic of Namibia being the only Sub-Saharan African country to supply water to its residents through municipal departments. The economy was worth $26.7 billion in 2019.
10. Republic of Colombia
10 Year Bond Yield as of November 30th, 2022: 13.030%
The Republic of Colombia is a South American country that was initially a part of the Spanish empire. It gained independence in 1819, and it is also one of the most bio diverse regions in the world as up to a staggering 45,000 and 2,000 marine fish species are found in it. The Republic of Colombia's economy is driven by mining and social services, and as of 2019, it was worth $785 billion. The country's largest trading partner was the United States, and GDP per capita stood at $15,541 in 2019.
9. Federative Republic of Brazil
10 Year Bond Yield as of November 30th, 2022: 13.206%
The Federative Republic of Brazil is the largest country in Latin and South America, and the fifth largest country in the world in terms of landmass. The country's economy was worth a whopping $3.7 trillion in 2022, making it the fifth largest economy in the world as well. The Federative Republic of Brazil is a strong exporting nation, as it sells highly lucrative aerospace parts, machinery, iron ore, maize, beef, chicken, tobacco, gold, and ethanol among other products. The country however has $325 billion of gross external debt, which explains the relatively high bond yield of 13.206%.
8. Islamic Republic of Pakistan
10 Year Bond Yield as of November 30th, 2022: 13.908%
The Islamic Republic of Pakistan is a South East Asian country that gained independence from the British Empire and neighboring India in 1947. It is primarily an agricultural country that also exports textiles but is heavily reliant on oil imports. The Pakistani economy was worth $1.5 trillion in 2022, making it the 26th largest in the world. However, the country has a mere $32 billion in exports, with its largest trading partner being the United States. Islamic Republic of Pakistan's gross external debt of $130 billion is more than three times its exports, and the country often finds it difficult to fund a large current account deficit fueled by its import reliant industry which needs expensive, dollar denominated equipment for exports.
7. Republic of Kenya
10 Year Bond Yield as of November 30th, 2022: 14.261%
The Republic of Kenya is a former British colony that gained independence in 1963. The country's economy is fueled by agriculture, tourism, and manufacturing. As of 2022, the economy was worth $308 billion, and its GDP per capita stood at $5,762. The Republic of Kenya's exports were $5.8 billion in 2017, and its largest importers were Pakistan and Uganda. However, its largest importing partner was China, a trend that is present in several developing countries that have come to rely on China for their imports. However, the long-term outlook for African countries like Kenya remain promising as major companies like Amazon.com, Inc. (NASDAQ:AMZN), Meta Platforms Inc (NASDAQ:META) and Tesla Inc (NASDAQ:TSLA) are looking to tap into the young African potential and are funding several startups in the African continent.
6. Republic of Kazakhstan
10 Year Bond Yield as of November 30th, 2022: 14.500%
The Republic of Kazakhstan is another transcontinental country on our list, which is located in both Europe and Asia. It is the ninth largest country in the world in terms of land, and the largest landlocked country. The economy relies on exporting oil and gas, metals, machinery, and coal among other products. Exports stood at a mere $58 billion in 2019, and the economy as a whole was worth $572 billion in 2021 with $26,033 of GDP per capita.
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Disclosure: None.15 Countries With The Highest Bond Yields is originally published on Insider Monkey.
As someone deeply immersed in financial markets and global economic trends, I bring a wealth of knowledge and expertise to dissect the intricacies of the article on the fifteen countries with the highest bond yields. My understanding goes beyond mere awareness, extending to the ability to interpret and analyze the underlying factors that drive bond markets and influence countries' economic landscapes.
The article highlights the significance of the bond market, often overshadowed by the more popular stock market, in controlling the global financial system and impacting national governments. It delves into the aftermath of economic decisions, such as the ambitious growth plan of the United Kingdom's former Prime Minister, Ms. Mary Elizabeth Truss, and the subsequent impact on bond yields.
Now, let's break down the concepts mentioned in the article:
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Bond Market Influence: The article emphasizes the influence of the bond market on the global financial system, particularly its role in shaping economic policies and influencing governments.
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Yield and Its Significance: The concept of yield is central to understanding the article. Yield refers to the interest paid by a bond and is a key indicator of risk. Higher yields signify greater risk, with investors demanding larger returns to compensate for the perceived risk.
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Credit Default Swap (CDS): Though not explicitly detailed in the provided excerpt, the article mentions that concepts such as yield and credit default swaps often go unnoticed by the public. A credit default swap is a financial derivative that allows an investor to "swap" or offset their credit risk with that of another investor.
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Inverted Yield Curves: The article hints at more complex financial concepts like inverted yield curves. An inverted yield curve occurs when short-term interest rates are higher than long-term rates, potentially signaling an economic downturn.
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Impact of Economic Plans on Bond Yields: The case of the U.K. and Ms. Truss's growth plan illustrates how economic decisions, particularly those involving increased government spending and lower taxes, can affect bond yields. In this context, higher yields reflect the concerns of bond investors about returns amidst increased fiscal activities.
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Global Bond Market Size: The article provides information on the size of the global government and investment-grade corporate debt securities market, emphasizing its substantial value of $59.2 trillion as of November 2022.
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Methodology for Ranking Countries: The methodology involves identifying countries with the highest bond yields. Higher yields indicate higher risk, reflecting the demand for larger returns. Data for the ranking is sourced from Tradingeconomics.com and Worldgovernmentbonds.com.
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Country-Specific Bond Yields and Economic Data: The article provides details on the bond yields of specific countries (Mexico, Russia, South Africa, Turkey, Namibia, Colombia, Brazil, Pakistan, Kenya, and Kazakhstan) as of November 30th, 2022. It also includes information on each country's GDP, GDP per capita, and key economic sectors.
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Impact of Global Events on Bond Yields: The article briefly touches upon the impact of global events, such as Russia's invasion of Ukraine, on the economies of affected countries and their bond yields.
In conclusion, my in-depth understanding of these concepts allows me to navigate the complexities of the financial world, providing valuable insights into the factors shaping global economies and bond markets.
