Media reports are indicating growing concerns among global investors regarding the soaring levels of public debt, cautioning governments against excessive borrowing ahead of elections. The heightened issuance of government debt in the US and the UK is projected to reach record highs, rivaling the levels witnessed during the initial phases of the Covid pandemic.
Emerging markets are also anticipated to contribute significantly to the surge in bond sales, with government debt reaching an unprecedented 68.2% of GDP last year, as reported by the Institute of International Finance and the Financial Times.
According to Jim Cielinski, global head of fixed income at Janus Henderson, the deficits are spiraling beyond control, lacking a viable mechanism for reining them in. He emphasized that within the next six to twelve months, this issue is poised to become a critical concern for markets, significantly impacting them.
Estimates suggest that the US Treasury will issue approximately $4 trillion worth of bonds this year, ranging from two to 30-year maturities, a substantial increase from $3 trillion in the previous year and $2.3 trillion in 2018. Factoring in Federal Reserve purchases and existing debt due, net issuance is projected to reach $1.6 trillion over a 12-month period until September, marking the second-highest on record, as calculated by RBC Capital Markets.
Financial Times further reported that according to estimations by a Canadian bank, net issuance for the years 2024-2025 is expected to surpass the levels observed during the pandemic era.
(With Agency Inputs)
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