World's governments seek to raise $7.6 trillion in 2012

Bond markets to be asked to fund vast levels of sovereign borrowing this year

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 (£4.9 trillion) 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 $3 trillion. The United States must raise $2.8 trillion. 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 government needs to roll over $165bn in 2012. The emerging markets of China, Brazil and India have to raise $121bn, $169bn and $57bn.

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 of €8bn in long-term debt. The French bond sale will be closely watched for signs that investors are losing faith in the solvency of the government of President Nicolas Sarkozy. The credit rating agency, Standard and Poor's said last month that 15 eurozone nations, including France and Germany, are at risk of being downgraded. France is widely expected to be stripped of its AAA credit rating in the coming weeks.

"The total volume of government bonds that needs re-financing isn't so much the concern because three quarters of the world's government bonds maturing in 2012 are issued by the US and Japan, and these countries can currently issue new bonds at little more than zero percent," said Mike Riddell , fixed income fund manager of M&G Investments. "The main risks are the big debt maturities of France and particularly Italy."

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 bills yielded 1.95 per cent yesterday, despite a downgrade of US debt by Standard & Poor's last year. And despite a gross sovereign debt pile equal to 240 per cent of GDP, Japan's 10-year borrowing costs are the second lowest in the world at 1 per cent.

France's 10-year borrowing cost yesterday was 3.3 per cent. President Sarkozy expressed the hope last month that European banks would use €489bn in cheap loans from the European Central to lend to European governments.