London March 21 2025: Outstanding government and corporate bonds globally exceeded $100 trillion last year, the OECD said on Thursday, with rising interest costs leaving borrowers facing tough choices and needing to prioritise productive investments.
Sovereign bond issuance in OECD countries is projected to reach a record USD 17 trillion in 2025, up from USD 14 trillion in 2023. Emerging markets and developing economies’ (EMDE) figures from debt markets has also grown significantly, from around USD 1 trillion in 2007 to over USD 3 trillion in 2024. The outstanding global stock of corporate bond debt reached USD 35 trillion at the end of 2024, resuming a long-term trend of over two decades of consecutive increases in indebtedness that came to a temporary halt in 2022.
In recent years, a significant amount of debt has been refinanced at higher yields compared to the original issues. As a result, interest payment to GDP ratios increased in about two-thirds of OECD countries in 2024 and reached 3.3%, an increase of 0.3 percentage points compared to 2023. This means spending on interest payments is greater than government expenditure on defence in the OECD on aggregate. Looking ahead, 42% of total sovereign debt and 38% of all outstanding corporate bond debt is set to mature in the next three years.
In OECD countries, central bank holdings of domestic sovereign bonds fell from 29% of total outstanding debt in 2021 to 19% in 2024, while domestic households’ share grew from 5% to 11%, and that of foreign investors from 29% to 34%. If current levels of debt are to be maintained, either existing investors will need to buy more debt or new, likely more price-sensitive, investors will need to enter the market, which could increase volatility.
Since 2008, corporate bond issuance has grown significantly above trend, while corporate investment has not. Cumulative bond issuance by non-financial companies in 2009-23 was USD 12.9 trillion higher than the pre-2008 trend, while corporate investment was USD 8.4 trillion lower. Rather than productive investment, a lot of debt in recent years has been used to fund financial operations like refinancings and shareholder payouts. This suggests existing debt is unlikely to pay itself off through returns on productive investment.
