Rising long-term sovereign bond yields reflect large and persisting fiscal deficits globally says OECD

OECD stated in its latest economic outlook that fiscal vulnerabilities could increasingly attract attention, tightening financial conditions and adversely impacting growth prospects. Rising long-term sovereign bond yields reflect large and persisting fiscal deficits combined with historically high levels of public debt in many economies. Further increases in term premia could heighten refinancing risks for some sovereign borrowers and may negatively feedback to parts of the financial system, including through the impact on the value of sovereign bond holdings. Ongoing vulnerabilities related to debt distress in emerging-market and developing economies also remain, especially for lower-income countries who have had difficulty accessing markets or declining levels of foreign aid. The majority of emerging and developing economies have seen an increase in government debt as a share of GDP since 2019 and a significant share of their sovereign bonds are set to mature by the end of 2026.