Is working in government debt in 2010 like working in securitization was in 2002?

If you're looking for a hot new area with wonderful growth potential and the possibility of new and exciting products, government debt may be it.

According to the FT's Gillian Tett, 'the word inside some big western investment banks is that public finance is set to be a focus for innovation in the coming years, in much the same way, say, that mortgage finance or leveraged buyouts used to spark so much creativity.'

Tett appears to be onto something. Sean Taor, global head of rates syndicate at Barclays Capital, tells us the European government bond market will, "have to innovate."

"Last year, sovereign debt issuance in Europe was up 43% on 2008," says Taor. "It will carry on rising this year, although not by as much. You will therefore have increased debt and a hugely increased redemption profile, particularly in 2012 and 2013. At the same time, the interest rate environment won't be as bond friendly in future and the challenges will be greater.

"European governments will have to look at other ways of issuing government debt rather than plain vanilla bonds and syndications," Taor predicts.

For the moment, however, jobs for government debt professionals are at the vanilla end of the spectrum. One headhunter says Deutsche, Morgan Stanley and Calyon are hiring, but the focus is on standard government bond traders.

Taor points out that banks already have the capability for innovating around government debt in house: "The expertise is here, it just hasn't been focused around sovereign debt until now."