Global debt nears $353T as demand shifts from US treasuries

Global debt climbed to a record of nearly $353 trillion by the end of March, as investors showed early signs of diversifying away from US Treasuries amid shifting fiscal dynamics, according to the Institute of International Finance (IIF).

The IIF’s latest Global Debt Monitor highlighted a divergence in investor demand, with a stronger appetite for Japanese and European government bonds contrasting with broadly stable demand for US Treasuries since the start of the year.

"These trends partly reflect diverging debt trajectories, which are increasingly influencing investor allocation decisions," said Emre Tiftik, director at the IIF for Global Markets and Policy, in a Reuters report.

Diverging debt paths shape investor flows

The report pointed to widening differences in fiscal outlooks among major economies as a key driver of changing investment patterns.

"Under current policies, the US debt-to-GDP ratio is expected to continue rising, and recent Congressional Budget Office projections indicate a further deterioration in the long-term fiscal outlook," Tiftik wrote.

In contrast, debt ratios in the euro zone and Japan are projected to follow a more moderate trajectory, even as fiscal expansion continues in those regions.

This relative stability has contributed to increased international demand for their sovereign bonds.

Despite the shift in government bond preferences, the US corporate bond market remains resilient.

Issuance linked to artificial intelligence investment and continued inflows from overseas investors have supported strong demand in that segment.

Global debt rises at the fastest pace since mid-2025

Global debt increased by more than $4.4 trillion in the first quarter alone, marking the fastest pace of growth since mid-2025 and the fifth consecutive quarterly rise, the report said.

The surge was largely driven by increased borrowing in the United States, particularly by the government.

Tiftik noted that Washington’s fiscal expansion has been a major contributor to the global debt increase.

China also played a significant role, with a sharp acceleration in borrowing by non-financial corporate entities, predominantly state-owned firms.

This borrowing growth outpaced that of the Chinese government.

Outside the world’s two largest economies, trends were more mixed.

Debt levels in mature markets edged lower, while emerging markets excluding China recorded a modest increase, reaching a record $36.8 trillion.

Government borrowing was identified as the primary driver in these regions.

Structural pressures to drive long-term debt growth

In terms of overall metrics, global debt stood at approximately 305% of world economic output, remaining broadly stable compared with levels seen since 2023.

However, regional trends varied, with debt ratios declining in mature markets and rising steadily in emerging economies.

The largest increases in debt-to-GDP ratios over the past quarter were recorded in Norway, Kuwait, China, Bahrain, and Saudi Arabia, each posting gains of more than 30 percentage points.

Looking ahead, the IIF warned that structural factors are likely to sustain upward pressure on global debt levels.

These include aging populations, increased spending on defense, energy security, diversification efforts, cybersecurity, and capital expenditure related to artificial intelligence.

"The recent conflict in the Middle East is set to further intensify some of these pressures," Tiftik said.