Key facts
- Sovereign wealth funds are seeking debt outside dollar-denominated bonds.
- Competition for capital is driven by sovereign borrowing needs and AI-related investments.
- Developing countries face funding challenges due to competition and debt burdens.
- Reserve managers are exploring solutions like hedging and borrowing against gold reserves.
Sovereign wealth funds are increasingly looking beyond dollar-denominated bonds to raise capital as competition for funds intensifies, according to Stephanie von Friedeburg, Citi's global head of public sector group. She noted on Thursday that this shift is driven by sovereign borrowing needs and private capital's pursuit of AI-related investments. Benchmark 10-year government bond yields in the world's 10 largest developed economies have risen by an average of 81 basis points this year. Von Friedeburg stated that developing countries are facing funding difficulties due to this competition and their existing debt burdens. Despite these trends, she affirmed that the US dollar will likely remain the dominant global reserve currency due to its market depth and liquidity. Rising gold prices are also prompting reserve managers to consider strategies like hedging and leveraging gold reserves.