OECD Global Debt Report 2026: Record Borrowing, Rising Risks, and the Future of Sovereign and Corporate Debt Markets

The USD 109 Trillion Global Debt Landscape

The third edition of the OECD Global Debt Report 2026 arrives at a critical juncture for global financial markets. Combined sovereign and corporate bond markets have swelled to an unprecedented USD 109 trillion, a figure that underscores both the extraordinary scale of modern debt financing and the systemic risks embedded within the global financial architecture. This report, drawing on OECD datasets, government surveys, and commercial market data, provides the most comprehensive analysis available of how sovereign and corporate borrowers are navigating an era of record issuance, shifting investor demand, and mounting fiscal pressures.

The numbers are staggering in their scope. OECD central government borrowing surged to USD 17 trillion in 2025, up from USD 12 trillion just three years earlier. Outstanding sovereign bond debt across OECD countries has reached a record USD 61 trillion, while the corporate side of the equation is equally imposing — with total outstanding corporate debt standing at USD 59.5 trillion, split between USD 36.4 trillion in bonds and USD 23.1 trillion in syndicated loans. These figures represent not merely statistical milestones but fundamental shifts in how governments and corporations finance their operations, investments, and obligations.

What makes this edition of the report particularly significant is its timing. Markets have displayed notable resilience amid elevated geopolitical uncertainty, episodic volatility, and transformational technological shifts driven by artificial intelligence. Yet the OECD’s analysis reveals that this resilience rests on increasingly fragile foundations — structural developments in the investor base, maturity profiles, and borrowing trajectories that could amplify rather than absorb future shocks. For anyone seeking to understand how financial stability intersects with sovereign debt dynamics, this report is essential reading.

Sovereign Borrowing Hits Record Levels in 2025

The scale of sovereign borrowing across OECD countries has entered uncharted territory. Gross borrowing by central governments reached USD 17 trillion in 2025, with projections pointing to continued expansion. The debt-to-GDP ratio for OECD central governments climbed to 83% in 2025 and is projected to reach 85% in 2026 — a level that stands 39 percentage points higher than the pre-Global Financial Crisis benchmark of 2007. This trajectory reflects not a temporary spike but a structural shift in how advanced economies finance themselves.

The drivers of this borrowing expansion are multifaceted. Persistent fiscal deficits, accumulated pandemic-era obligations, rising defence expenditures, and growing demand for public investment in areas such as climate transition and digital infrastructure have all contributed. Net borrowing across the OECD aggregate held relatively stable at approximately USD 3.5 trillion in 2025 but is projected to grow to nearly USD 4 trillion in 2026 — the second-highest level since the extraordinary pandemic borrowing of 2020.

Country-level dynamics reveal important divergences. The United States has dramatically increased its share of OECD refinancing requirements, rising from 57% in 2020 to 70% in 2025 — making American fiscal decisions the single most consequential variable in global sovereign debt markets. Conversely, Japan’s share declined from 16% to 7% over the same period. Countries like Belgium, Iceland, and Portugal reported notable increases in refinancing requirements, while Estonia, Greece, and Ireland found themselves in the unusual position of managing lower borrowing needs as a primary challenge.

Interest expenditures across the OECD aggregate have climbed to 3.3% of GDP, approaching the decade-high peak of 3.4%. For the average OECD issuer, interest payments stand at approximately 2% of GDP — just below the 2015 peak of 2.1%. These figures may appear modest in isolation, but they represent hundreds of billions of dollars redirected from productive public spending toward debt servicing, creating what economists call a fiscal crowding effect.

Refinancing Risk and the Treasury Bill Surge

Perhaps the most consequential structural trend identified in the OECD Global Debt Report 2026 is the pronounced shift toward shorter-maturity debt instruments. Treasury bill issuance accounted for roughly 48% of total government borrowing in 2025, near a record high, with projections suggesting this proportion will persist into 2026. While treasury bills represent only about 15% of the total debt stock, their outsized share of new issuance reflects a deliberate strategy by debt management offices to minimize immediate interest costs in a higher-rate environment.

This strategy carries significant risks. By concentrating issuance in shorter maturities, governments must return to capital markets more frequently to refinance maturing obligations. Refinancing requirements across the OECD reached approximately USD 13.5 trillion in 2025 — representing nearly 80% of gross borrowing — and are projected to increase by roughly USD 1 trillion in 2026. This creates a scenario in which governments are structurally dependent on continued market access and favorable financing conditions, leaving them exposed to sudden shifts in investor sentiment or liquidity conditions.

The term premium — the additional yield investors demand for holding longer-dated bonds over successive short-term instruments — has risen to its highest level in over a decade. The average estimated 10-year term premium across OECD countries stood at 0.84% at the end of 2025, while the median 30-year yield reached 4.1%. These movements signal that bond markets are increasingly pricing in the risks associated with elevated debt levels and uncertain fiscal trajectories, demanding greater compensation for duration exposure.

For countries like Belgium, which has responded by increasing syndication volumes, and Portugal, which expanded the number and size of its auctions, the operational challenge of managing large refinancing walls is already reshaping debt management practices. The question is whether these tactical adaptations are sufficient to address what is fundamentally a strategic vulnerability in sovereign balance sheets.

Corporate Bond Markets and the Debt Issuance Boom

The corporate side of the global debt equation has been equally dynamic. Corporate borrowing from capital markets reached its highest-ever level in real terms during 2025, with approximately USD 13.7 trillion raised through a combination of corporate bonds (USD 6.8 trillion) and syndicated loans (USD 7.0 trillion). Outstanding corporate debt at year-end stood at USD 59.5 trillion — a figure that increasingly rivals sovereign debt in scale and systemic importance.

What makes the current corporate debt environment particularly noteworthy is the compression of credit spreads to near-historical lows. Despite elevated geopolitical uncertainty, high borrowing volumes, and fundamental questions about credit quality in certain sectors, the gap between corporate bond yields and risk-free government rates has narrowed dramatically. The OECD’s analysis suggests this compression is driven more by improved market liquidity and structural supply-demand dynamics than by genuine improvements in underlying credit fundamentals.

This distinction matters enormously. When credit spreads are compressed for technical rather than fundamental reasons, the market’s ability to differentiate between strong and weak borrowers diminishes. Expected default losses now account for the largest share of corporate credit spreads, meaning that investors are receiving less compensation for bearing credit risk relative to the actual probability of default. For investors navigating these dynamics, understanding the intersection of corporate credit risk and market structure has never been more important.

The report also highlights a structural shift in the cost of corporate borrowing. For the first time since 2016, investment-grade bonds with coupons exceeding 4% account for half of the total investment-grade bond stock. This reflects the cumulative impact of higher interest rates on corporate financing costs and suggests that the era of ultra-cheap corporate borrowing has decisively ended.

How AI Investment Is Reshaping Corporate Financing

One of the most forward-looking findings in the OECD Global Debt Report 2026 concerns the transformative impact of artificial intelligence on corporate debt markets. Nine major hyperscaler companies — the technology giants building the infrastructure for the AI economy — raised USD 122 billion from bond markets in 2025 alone, accounting for nearly half of all technology firm issuance globally. This single statistic illustrates how AI is not merely a technological revolution but a financial one, redirecting massive capital flows through bond markets.

The scale of planned investment is even more remarkable. These nine hyperscalers have collectively forecast capital expenditure of USD 4.1 trillion between 2026 and 2030, primarily directed toward data centers, specialized computing hardware, and AI training infrastructure. If even half of these investments were financed through bond issuance, the nine companies alone would account for approximately 15% of historical annual average issuance by all non-financial companies globally. Their share of global equity market capitalization already stands at roughly 12%, and their footprint in debt markets is growing commensurately.

This concentration of corporate borrowing in a small number of technology firms raises important questions about market structure and systemic risk. The convergence of massive AI capital expenditure requirements with record sovereign borrowing needs creates potential competition for investor capital that could push yields higher across both government and corporate bond markets. Policymakers face the challenge of ensuring that public investment needs — in defense, infrastructure, and climate transition — do not crowd out private sector access to capital markets, while simultaneously managing the systemic implications of technology firms becoming dominant participants in global debt markets.

The Shifting Investor Base for Government Bonds

The OECD report identifies a structural transformation in the investor base for government bonds that has profound implications for market stability. Central banks, which became the dominant holders of government debt through successive rounds of quantitative easing following the 2008 financial crisis, have been systematically reducing their balance sheets. While central banks remain the largest domestic holders of government debt in many OECD countries, their withdrawal from active purchasing has created a vacuum that is being filled by fundamentally different types of investors.

The new marginal buyers of government bonds tend to be more price-sensitive, shorter-term in orientation, and in some cases leveraged. Hedge funds have significantly expanded their presence in sovereign debt markets, alongside open-ended investment funds, exchange-traded funds (ETFs), and principal trading firms. These participants contribute positively to market liquidity during normal conditions — their willingness to trade actively enhances price discovery and reduces bid-ask spreads. However, their behavior during periods of market stress differs fundamentally from that of central banks, which acted as stabilizing anchors willing to absorb losses and hold positions indefinitely.

The implications are significant. A market in which the marginal price-setter is a leveraged hedge fund operating with tight risk limits responds very differently to shocks than one in which central banks provide backstop demand. The OECD’s survey data confirms that volatility, while generally declining across 2025, experienced episodic spikes driven by geopolitical events — and that these spikes were amplified by the behavior of leveraged participants forced to reduce positions quickly. This dynamic creates what market participants call “liquidity illusion” — the appearance of deep, liquid markets that can evaporate precisely when liquidity is most needed.

Emerging Market Debt Vulnerabilities and Fiscal Pressures

While advanced economies grapple with record debt levels from a position of relative institutional strength, emerging market and developing economies (EMDEs) face a more precarious situation. EMDE sovereign bond issuance reached a record USD 3.4 trillion in 2025, a 21% increase over 2024 levels. The outstanding stock of EMDE sovereign bonds has climbed to USD 12.1 trillion, equivalent to approximately 30% of GDP — the highest ratio since before the 2007 financial crisis.

The maturity profile of EMDE debt creates particular cause for concern. More than one-third of the outstanding EMDE bond stock is scheduled to mature within the next three years, creating concentrated refinancing pressures that leave these economies vulnerable to shifts in global financing conditions. For low-income countries, the situation is even more acute — over 50% of outstanding bonds mature within three years, meaning that these governments face the near-certainty of having to refinance a majority of their market debt during a period of elevated global interest rates and uncertain investor appetite.

The report notes some positive developments: sovereign spreads in certain larger EMDEs tightened during 2025, reflecting improved market confidence in their fiscal management and institutional frameworks. However, this aggregate picture masks significant dispersion. Countries with weaker institutional frameworks, commodity dependence, or political instability face substantially higher borrowing costs and more limited market access. The gap between the strongest and weakest EMDE borrowers has widened, creating a bifurcated emerging market debt landscape that requires differentiated policy responses.

Understanding these dynamics is critical for investors and policymakers alike. The IMF’s Global Financial Stability Reports have consistently highlighted the interconnection between advanced economy monetary policy and EMDE debt sustainability, a theme that the OECD report reinforces with granular data on issuance patterns and maturity profiles.

Bond Market Liquidity and Financial Stability Risks

Despite the record-breaking issuance volumes and elevated uncertainty, the OECD’s analysis finds that bond market liquidity generally improved during 2025. Higher trading volumes, greater collateral availability, and well-functioning repo markets all contributed to orderly market conditions. This finding is notable given the potential for record supply to overwhelm market absorption capacity, and it suggests that the institutional infrastructure supporting government and corporate bond markets has proven more resilient than many analysts anticipated.

However, the report carefully distinguishes between normal-state liquidity and stress-state resilience. The factors that have improved day-to-day market functioning — increased participation by leveraged investors, growth of algorithmic and high-frequency trading, and expansion of ETF-intermediated bond trading — may behave differently during periods of acute stress. The flash volatility events of recent years, including episodes triggered by geopolitical shocks and unexpected policy announcements, have demonstrated how quickly apparently liquid markets can seize up when multiple leveraged participants attempt to exit positions simultaneously.

Repo markets have played a crucial and underappreciated role in supporting bond market functioning. By providing the collateral transformation and financing mechanisms that enable market-makers and leveraged investors to operate, repo markets serve as the plumbing of the global bond ecosystem. The OECD’s data shows that collateral availability improved in 2025, partly due to central bank balance sheet reduction making more bonds available for private market use. Yet this same dynamic — central banks as net sellers rather than net buyers — means that the traditional backstop for market stress has been partially withdrawn.

The World Bank’s debt management framework emphasizes the importance of maintaining robust institutional infrastructure precisely because market resilience cannot be assumed to persist through all conditions. The OECD report echoes this assessment, warning that the current favorable liquidity environment should not breed complacency about structural vulnerabilities in market microstructure.

Policy Recommendations for Sustainable Debt Management

The OECD Global Debt Report 2026 concludes with a series of policy recommendations that reflect the urgency of the current moment. First and foremost, the report emphasizes that debt market resilience ultimately depends on credible macroeconomic policy frameworks. Monetary policy credibility — the confidence of market participants that central banks will maintain price stability — serves as the foundation upon which sovereign debt markets function. Without this anchor, the structural shifts in the investor base and maturity profiles would pose far greater risks.

Fiscal prudence receives equally strong emphasis. The report calls for stronger efforts to promote fiscal sustainability and enhance the efficiency of public sector spending, arguing that sound fiscal management not only helps manage current elevated debt burdens but also creates the fiscal space necessary for future investment in areas such as climate transition, digital infrastructure, and defense modernization. This dual mandate — managing existing debt while preserving capacity for new investment — represents the central challenge for fiscal policymakers in the coming decade.

For debt management offices specifically, the report recommends active management of refinancing risks through diversified funding instruments, careful issuance timing, and investor base diversification. The trend toward shorter maturities, while understandable as a cost-minimization strategy, needs to be balanced against the systemic refinancing risks it creates. Countries that have successfully navigated large refinancing walls — through techniques such as syndication (Belgium), expanded auction programs (Portugal), and new bond line creation (Iceland) — offer operational models for others facing similar pressures.

The report also calls for enhanced monitoring and regulation of the changing investor base, particularly the growing role of leveraged participants and the systemic implications of ETF-intermediated bond trading. Policymakers must recognize that a market dominated by price-sensitive, short-horizon investors requires different regulatory frameworks and crisis management tools than one anchored by central bank demand. For readers interested in how these policy frameworks translate into practical implementation, our analysis of global fiscal policy frameworks provides additional context.

Finally, the OECD stresses the particular importance of supporting EMDEs and low-income countries in managing their concentrated maturity profiles and market access challenges. International coordination — through multilateral institutions, bilateral support, and innovative financing mechanisms — is essential to prevent the global tightening of financing conditions from triggering debt crises in the most vulnerable economies. The structural pressures identified in this report are not self-correcting; they require deliberate, coordinated policy responses from governments, central banks, and international institutions working in concert.