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1. Eurointelligence:

The figures in the OECD’s latest Global Debt report are truly staggering: sovereign and corporate bond borrowing reached $25 trillion in 2024, nearly three times the 2007 level. Total sovereign and corporate debt outstanding is over $100 trillion, 40% of which will be maturing by 2027. Refinancing costs for governments are thus increasing at a time when they want to raise spending on defence and climate change. The OECD also shows how corporate borrowing has followed an upward trend since 2009, but that this was not accompanied by more investment. Where did all this money go, and who will finance the repayment of those debt piles if there is no investment in growth of the economies?

Since 2008, governments have used the money to cushion the effects of the financial crisis, the health crisis and the energy crisis, and as slush funds for increasingly protracted coalition negotiations. Companies have used the money to postpone repayments through refinancing operations and share buybacks. None of those will raise the productivity of the economy. It has been the classic kicking-the-can-down-the-road syndrome that we have been writing about since the financial crisis.

The costs for refinancing those bonds will be substantially higher for bonds issued before 2024. This means states and companies have to either find more money to service their debt or cut down their debt exposure. There are also increased risks on the demand side, as central banks are reducing their stocks of government bonds leaving it to investors and households to hold their bonds. Higher savings locked away in bonds are not helping the economy either to flourish. Less central bank and more private investors also means a higher risk of volatility in the market, which will increase the bill even further. (Sources: oecd.org, eurointelligence.com)

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