Why 3 of Europe's biggest economies are paying a premium for borrowing as bond traders baulk at 'BIF' debt credibility

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Bond investors are exacting a heavy price from three of Europe’s largest economies, which are struggling with a credibility crisis as the Iran conflict thrusts government borrowing back into the spotlight.

“Britain, Italy and France have now become nations where spreads to what we’d call core nations — such as the U.S. and German government bonds — have been widening where there’s been concerns about inflation and how effectively these sovereigns play their way out of it,” said Craig Inches, head of rates and cash at Royal London Asset Management.

Collectively dubbed the ‘BIFs’ — a throwback nod to the so-called ‘PIIGS’ (Portugal, Ireland, Italy and Spain), the problem children of the 2011 European sovereign debt crisis — Britain, Italy and France each face their own set of unique challenges.

While the 2011 euro crisis centered on solvency issues, governments in London, Rome and Paris now grapple with a credibility challenge — and investors are increasingly grouping them together as the new fiscal misbehavers.