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At the same time the Treasury and other government and quasi government borrowers have borrowed money at an average interest rate of about 2percentt.
"Banks' exposure to local government borrowers is greater than we anticipated," Yvonne Zhang, a Moody's analyst, said in a statement.
Wednesday's infusion could also help reduce the pressure on beleaguered government borrowers on the periphery of the Continent, most significantly Italy and Spain.
In Italy, weak demand for bonds pushed yields back above the critical 7 percent threshold, a level that has prompted other government borrowers to seek bailouts.
The rating agency Moody's has recently reaffirmed the Cayman Islands' Aa3 credit rating – one of the highest of all government borrowers.
The prospect of slower growth across the Continent, and fears that budget deficits will balloon, is a major reason the selling has spread beyond Italian bonds to much stronger government borrowers with AAA credit ratings like France.
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The United States government is by far the world's biggest government borrower, expected to run up nearly $1 trillion in new debt over this year and next.
Last year it raised another ¥30 billion, largely from local governments, borrowers and depositors, who have now lost their money.
Restarting these capital flows is a high priority preferably with more prudent rules for the credit market.Alongside this problem is another: finding a way to share the pain of restructuring private-sector debts among governments, borrowers and bankers.
Government borrowing pushes up interest rates as government competes with private borrowers.
With a greatly reduced government backstop, borrowers would likely have to contend with higher down payment requirements, Mr. MacEachin said.
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