Tullet Prebon warns of sovereign debt default in 2010

Inter-dealer broker Tullet Prebon, which arranges trades between market participants, has today warned that it expects a second crisis to hit the worldwide economy in 2010 caused by sovereign debt defaults. This is an unwelcome reminder that many governments around the world have seen their finances stretched to breaking point and indeed some countries may default on their sovereign debt in 2010.

Despite the fact that the Greek budget deficit debacle appears to be coming to a close, with the European Union about to step in with a financial rescue package, Tullet Prebon would seem to indicate that market participants believe further problems with other countries may lay ahead. While no names have been mentioned it is known that Spain, Portugal and Ireland have had their own financial troubles in the short term and indeed the UK, while unlikely to default on sovereign debt, has also seen its finances stretched to the limit.

It will be interesting to see how the sovereign debt market progresses in 2010 because comments by well-informed participants such as Tullet Prebon will obviously hit home with many investors and we could see many looking around for the next potential default. Rumours and counter rumours can and have affected the sovereign debt market in the past and there is a need to be very careful about the reliability of information passed between market participants.