Key facts
- Fitch Ratings warned that rising government bond yields are worsening the debt outlook for developed economies.
- Benchmark 10-year government bond yields in the 10 largest developed economies have risen by an average of 81 basis points this year.
- Developed-market government debt is projected to increase by nearly $4 trillion, surpassing $75 trillion.
- France faces a steep challenge, needing to cut its primary deficit and adjust fiscally due to higher borrowing costs.
- The US is expected to have the largest general government budget deficit at 7.5% of GDP, or $2.4 trillion, this year.
- By 2030, France's debt-to-GDP ratio is forecast to rise by 12 percentage points to 128%.
Rising government bond yields are significantly complicating efforts by major developed economies to manage and stabilize their debt burdens, according to a report by Fitch Ratings.
The credit rating agency stated that benchmark 10-year government bond yields across the world's 10 largest developed economies have increased by an average of 81 basis points this year. This surge in borrowing costs is expected to contribute to an overall increase of nearly $4 trillion in developed-market government debt, pushing the total above $75 trillion.
Fitch highlighted that the median 10-year yield is now 161 basis points above the average interest rate paid on outstanding debt, making it more difficult to reduce or even maintain current debt levels. France is identified as facing one of the steepest challenges, requiring a substantial cut in its primary deficit and further fiscal adjustments to stabilize its debt burden amid higher effective borrowing costs.
The US is projected to have the largest general government budget deficit this year, estimated at 7.5% of GDP or $2.4 trillion, followed by France, the UK, and Germany. While deficits are expected to widen most in Germany, the US, and Canada, Britain is forecast to see the most significant narrowing. By 2030, debt-to-GDP ratios are anticipated to rise most sharply in France, reaching 128%, with the US and Germany also seeing increases, while Japan's ratio is expected to decline.