Governments need to tap markets for $8trn this year

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The world's sovereign bond markets face a monumental test in 2012 as the largest economies attempt to roll over a combined total of $7.6 trillion (£4.9trn) in debt.

Data compiled by Bloomberg show the full extent of the financing needs of the largest nations over the next 12 months. The largest borrower will be Japan, which needs to roll over $3trn. The United States must raise $2.8trn.

Next in line is the troubled Italian government, which is looking to raise $428bn. The twin supporting pillars of the eurozone, France and Germany, must borrow $367bn and $285bn. The UK needs to roll over $165bn. The emerging markets of China, Brazil and India have to raise $121bn, $169bn and $57bn.

The total $7.6trn rises to more than $8trn when interest payments are included. "It's a big number and obviously because many governments are still in a deficit situation the debt continues to accumulate," said Elwin Groot, an economist at the Rabobank Nederland.

Germany will kick off the 2012 sovereign borrowing season today, when it holds an auction to raise €5bn. France will follow tomorrow with an auction to raise €8bn in long-term debt. The French bond sale will be especially closely watched for signs that investors are losing faith in the solvency of the government of President Nicolas Sarkozy.

Portugal had to be bailed out by the European Union and the International Monetary Fund in 2011 (following similar rescues of Greece and Ireland in 2010) after it found itself unable to finance itself in the private bond markets. The borrowing costs of Italy and Spain rose to distress levels in November, prompting fears that those two nations would also need to be rescued.

However, the borrowing costs of other nations have fallen dramatically in recent months. Yields on 10-year British sovereign bonds fell to an all-time low of 1.93 per cent last week. Ten-year German Bunds are also trading at yields below 2 per cent. America's 10-year Treasury bonds yielded 1.95 per cent yesterday, despite a downgrade of US debt by Standard & Poor's last year.