Comment Comment by PaywallBuster PIGS (Portugal, Italy, Greece, Spain, missing anything here?) have high debtFor simplification let's say they spend 10% of their anual budget servicing debt at an average of 5% interest rateIf the base interest rate rises by 50 bps, you could argue the average debt held by PIGS would eventually rise by the same amount, _at least_!So now you have 5.5% interest rates, which is a 10% increaseSo the anual budget used to service the debt would also increase by 10%, from 10% to 11%By buying bonds from these countries you pressure the yields down parent PaywallBuster 4 years ago
For simplification let's say they spend 10% of their anual budget servicing debt at an average of 5% interest rate
If the base interest rate rises by 50 bps, you could argue the average debt held by PIGS would eventually rise by the same amount, _at least_!
So now you have 5.5% interest rates, which is a 10% increase
So the anual budget used to service the debt would also increase by 10%, from 10% to 11%
By buying bonds from these countries you pressure the yields down