Public Debt Affects Forex

In the accounts of any country must take into account the payment of debt and fundraising. This funding can come from several sources, including the issuance of bonds, also called sovereign debt. The issuance of such bonds is the main source of funding for many countries, especially in emerging countries.

And it is in these countries that meet its sovereign debt obligations, while boosting economic growth, can become great effort, sometimes problematic. And before a funding problem, it is essential to follow a plan to avoid falling into that creditors BANKRUPTCY and knock on the door, a situation that some countries have come along in history.

What is public or sovereign debt?
The vast majority of countries worldwide issue debt to finance their growth, from the richest countries to developing countries. To give you an idea of how it works is similar to how any company seeking funding for a new project or a new business, and to have a closer example would be like the home mortgage of any family. In other words, government debt is like a mortgage acquired by the government of the country, a big mortgage that can reach billions of euros easily. This type of debt can be incurred by public entities also lower as regions, provinces or municipalities.

The country's debt is issued through the so-called debt bonds and these bonds are what investors buy bid bond / debt. The country must pay to each investor the value of the bond (which would be the money borrowed by the investor to the country) plus a certain interest and within a certain period. Usually bonds are sold through auction and are at different maturities (one, two, five or ten years). The interest rate will be higher gotten longer term and is usually expressed as interest rate annualized. Generally, these bonds are sold in international financial markets.