After years of cheap money, the cost of borrowing for many governments is going up.<\/p>\n
Sticky inflation, swelling deficits, and political instability have all driven bond yields higher \u2014 the market\u2019s way of saying that investors need bigger returns<\/a> to be comfortable lending to governments. <\/p>\n Earlier this month, long-term borrowing costs surged<\/a> across the globe, with UK 30-year gilts jumping to late 1990s levels, German Bunds hitting their loftiest<\/a> since 2011, and France\u2019s 30-year bonds<\/a> rising to a 14-year high. Even Japan \u2014 long synonymous with rock-bottom yields \u2014 saw its 20-year bonds climb<\/a> to their highest point since 1999. In the US, 30-year Treasurys hovered near 5% last week, the highest since July and a threshold rarely touched in the 2010s, though they have since retreated.<\/p>\n Indeed, global public debt has continued to balloon to an almost comically large figure.<\/p>\n Global public debt is always something of a hard concept to get your head around. Planet Earth doesn\u2019t owe that money to Mars or anything like that; instead, it\u2019s the sum of government debt worldwide. And per data from the UN, it reached<\/a> a record $102 trillion last year, rising more than 6x since 2000.<\/p>\n Roughly 70% of that is owed by developed countries, where debt levels have risen relative to the size of their economies.<\/p>\n The IMF projects<\/a> global public debt will exceed 95% of world GDP this year and edge toward 100% by 2030.<\/p>\n Among the biggest<\/a> contributors to the surge is China, where public debt has shot up from 23% of GDP in 2000 to 88% last year \u2014 fueled by the massive 2008 stimulus<\/a>, years of debt-financed infrastructure investment (often off the books<\/a>), and its recent move to bring some of those \u201chidden\u201d local borrowings onto the official state\u2019s balance sheet.<\/p>\n In the public\u2019s (dis)interest?<\/p>\n Zooming out from Beijing, though, the stories are similar. Covid-era stimulus left debt piles much heavier across economies, while sluggish growth and trade wars have made it even harder<\/a> for them to grow out of debt.<\/p>\n But what\u2019s really ramped up the pressure is the sharp rise in interest rates \u2014 the fastest in four decades<\/a> \u2014 which pushed<\/a> benchmark rates in advanced economies to more than 5x their 2010s average as central banks fought inflation. The result? Higher borrowing costs everywhere, and a whole host of countries that are now spending more on the interest on their debt<\/a> than on public services.<\/p>\n America is no exception: Uncle Sam\u2019s interest bill came in at a cool $882 billion last year, more than it spent on defense or Medicare, which contributed to<\/a> Moody\u2019s stripping the country of its last AAA credit rating in May. <\/p>\n Still, the squeeze is being felt more acutely in developing economies, which have been borrowing<\/a> at rates 2x to 4x higher than the US. Over the past 15 years, their debts have swelled by a \u201crecord-setting clip,\u201d leaving them with roughly 50-50 odds of a financial crisis, according to<\/a> analysis from World Bank Chief Economist Indermit Gill in June.<\/p>\n","protected":false},"excerpt":{"rendered":"After years of cheap money, the cost of borrowing for many governments is going up. Sticky inflation, swelling…\n","protected":false},"author":2,"featured_media":19257,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[138,219,111,139,69],"class_list":["post-19256","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-new-zealand","tag-newzealand","tag-nz"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/19256","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=19256"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/19256\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/19257"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=19256"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=19256"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=19256"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}