Okuma Group: Debt Of Pigs Weighs On European Union

Asia-based asset management firm, Okuma Group apparently believes that the United Kingdom is likely to be the focus of Speculator attention in the event of an EU bailout of the PIGS nations.

PIGS is the acronym given to Portugal, Ireland, Greece and Spain who represent the most indebted economies in the European Union. Recently, Greece has seen the yield on its 10 year treasury bill exceeds 7% thanks to speculators betting that the country is likely to default on its debt unless a bailout is mounted by the European Union. In stark contrast, the yield payable on a 10 year German bund currently stands at 4%.

Despite public statements to the contrary, Okuma Group believes that the EU will eventually orchestrate a bailout for the beleaguered PIGS nations and that, speculator attention will shift towards the UK which does not use the single currency.

The firm believes that the UK's 10 year gilt may see its yield increase significantly which would spark interest rate rises in other long-term debt sectors including mortgages. A source close to the firm said that there was a distinct possibility of the UK having to turn to the International Monetary Fund for a bailout.

The Bank of England recently announced its decision to pause its program of quantitative easing after the UK emerged from its longest recession since World War II but many economists believe that the central bank may need to restart the program as confidence wanes in the current and next government's ability to reduce the country's public sector debt burden.

Okuma Group continues to advise clients to divest themselves of sterling denominated assets including cash.