Bond Woes to Worsen as Austerity Suffocates Growth: Euro Credit

Borrowing costs may rise even further for Europe’s most indebted nations as slower growth at home combines with a weakening global economy to subvert deficit-reduction plans, measures in the bond market show.

“The market is afraid of a lack of growth that will make debt rebalancing quite a challenging task,” said Koen Van De Maele, global head of fixed income at Brussels-based Dexia Asset Management, which oversees the equivalent of about 83 billion euros ($113 billion). “As an investor, if you know that the growth will be lower then it’s definitely a concern in terms of the debt sustainability. You have to balance the risk and the return.”