Global Debt Concerns Mount as Yields Climb, Pressuring Governments

Investors are demanding higher premiums to hold government debt amid soaring deficits, sticky inflation, and escalating tensions over central bank independence. Long-dated bond yields have surged to 2009 levels, reflecting market expectations that the rate-cut cycle is nearing its end—with some countries potentially pivoting to hikes sooner than anticipated.

The calculus for holding long-term debt grows increasingly precarious. Traders note that the appeal of fixed payments over decades is offset by mounting risks: unchecked fiscal trajectories, political gridlock, and inflation that may constrain monetary flexibility. Even as economic growth shows cracks, the US defies traditional patterns—equities hit record highs while stubborn price pressures push long-term yields upward.

Global debt now totals $324 trillion, with China, France, and Germany driving recent increases. The dual crises of 2008 and the pandemic triggered borrowing sprees, leaving governments with dwindling fiscal runway. Market participants see few credible plans to stabilize public finances—a vacuum that could amplify volatility across asset classes.