Global debt markets are navigating a difficult terrain. Geopolitical tensions, trade disputes, and the prospect of further macroeconomic headwinds are adding pressure to already stretched markets. So far, the debt landscape is not clearly reflecting these developments, showing few signs of strain. Volatility has moderated, liquidity is improving, sovereign spreads in several emerging markets have tightened, and corporate credit spreads are near historic lows. Debt markets have been remarkably resilient to a series of shocks in recent years, including the unusual co-occurrence of high deficit and elevated yields.
This surface-level stability, however, masks deeper structural developments that may be adding to risks which could crystalise suddenly if current macro-trends continue. Borrowing levels – public and private – remain elevated and are set to increase further as sovereign funding needs grow and as the corporate sector increasingly taps debt markets to finance the enormous capital needs of the artificial intelligence expansion. This funding will increasingly be supplied by a more price-sensitive investor base as central banks have reduced their bond holdings and as traditional long-term buyers increasingly operate alongside shorter-term investors, sometimes with significant leverage. On the one hand, these investors bring much-needed liquidity and diversity to global debt markets. On the other hand, it may render issuers more exposed to shocks and greater price movements, calling into question the stability of the world’s USD 109 trillion sovereign and corporate bond markets.
This is taking place in a world in which borrowing costs continue to increase, especially at longer maturities, fuelled by a structural decrease in long-term demand and concerns about fiscal trajectories. Governments and companies are responding by skewing their issuance towards shorter maturities which, while mitigating the impact of increasing interest expenditures, also exposes them to greater refinancing risk.
The current landscape is also characterised by complexities that make traditional signals more difficult to interpret. For example, because investors have different incentives and liability structures, shifts in the investor base can change yields at some maturities more than others. That makes it difficult to pin down what yield increases reflect changes in risk perception as opposed to structural shifts in demand. Similarly, low corporate credit spreads may be driven more by improvements in liquidity than enhanced fundamental credit quality. Distinguishing technical and fundamental factors is critical to informed policymaking, but increasingly difficult given the number of moving parts in today’s markets.
The resilience debt markets have shown in the face of major pressures should not be taken for granted. It rests on a foundation of rigorous monetary policy frameworks, serious commitments to sound fiscal policy, and trust in the integrity of the institutions governing these markets.
Through a deep dive into recent market developments, my hope is that the 2026 edition of the Global Debt Report can help equip policymakers with the knowledge they need to safeguard that resilience, a prerequisite for long-term investment and growth.
Carmine Di Noia,
Director for Financial and Enterprise Affairs, OECD