PARIS, 11 March. - (ANA) - At the end of 2023, the total volume of sovereign and corporate bond debt stood at almost $100 trillion according to an OECD report, similar in size to global GDP.

 

A low interest rate environment post-2008 has led to a surge in bond issuance and has opened these markets to a wider range of issuers, including lower rated governments and companies. 

 

The sustainable bond market, which is focused on bonds that finance green and social projects or provide incentives for issuers to improve their overall sustainability, has also emerged in the last decade and has grown rapidly since 2018.

 

 

 

 

A considerable amount of bonds will mature over the next three years, and will mostly be refinanced at higher rates than when they were originally issued, adding to financing pressures, notably in emerging economies. 

 

Several highly indebted countries, including in the OECD, may potentially face a negative feedback loop of rising interest rates, slow growth and growing deficits unless bold steps are taken to enhance fiscal resilience.

 

At the same time, borrowing needs are higher than ever. Demographic changes, slowing economic growth and decarbonisation will require the mobilisation of tens of trillions of dollars. Successfully managing this has profound implications for government spending and financial stability. 

 

 

 

 

 

Sovereign and corporate bond markets have grown significantly since 2008. A favourable funding environment contributed to a surge in bond issuance which also expanded into riskier market segments, including lower rated governments and companies.

 

At the end of 2023, the total volume of sovereign and corporate bond debt stood at almost USD 100 trillion, similar in size to global GDP. Total OECD government bond debt is projected to increase to $56 trillion in 2024, an increase of USD 30 trillion compared to 2008. At the end of 2023, global corporate bond debt reached USD 34 trillion and over 60 per cent of the increase since 2008 came from non-financial corporations.

 

The sustainable bond market has emerged in the last decade and has grown rapidly since 2018

 

 

At the end of 2023, the total amount of corporate and official-sector sustainable bonds outstanding totalled $4.3 trillion, up from USD 641 billion just five years prior.

 

This has made it a key source of funding for both governments and companies to accelerate their transition to a low-carbon economy. In the sustainable bond market, the corporate sector accounts for more than half of total issuance.

 

 

 

 

Favourable funding conditions between 2008 and 2022 enabled many governments and companies to borrow at low cost. However, around 40% of sovereign bonds and 37% of corporate bonds globally will mature by 2026, requiring further borrowing from the markets under higher interest rates. Even if inflation is brought down to central banks’ targets, yields will likely remain higher than when most of the debt was originally issued.

 

This will lead to growing financing pressures, particularly in emerging economies where the amount of corporate bonds maturing in the next three years is significant, representing 51% ($4.4 trillion) of the total in 2023.   - (ANA) -

 

For more information on the report, visit: https://www.oecd.org/finance/global-debt-report/?utm_campaign=Global%20Debt%20Report%20Launch&utm_content=Read%20the%20report&utm_term=daf&utm_medium=email&utm_source=Adestra

 

 

AB/ANA/11 March 2024 — - -