Global debt is worth $100,000 billion. There is alarm, that's why

The OECD picture of global debt, relating to sovereign and corporate bond issuance, is alarming for a number of reasons.
The OECD Global Debt Report 2024 published on Thursday 7 March announced that, at the end of 2023, the total volume of sovereign and corporate bond debt was worth almost $100 trillion, an amount similar to global GDP.
Faced with an economic and financial scenario that has changed significantly in recent years, with central banks raising interest rates to record levels after the cost of money had remained close to zero or negative, the risks of an explosion of the situation debt levels of states and societies are growing alarmingly.
The OECD has identified some advanced economies with high debt-to-GDP ratios, low-income countries with lower ratings and highly leveraged corporate issuers in some sectors, particularly real estate, as those most likely to fall into the debt trap .
Global debt at $100 trillion: this is how the bond market is changing Since interest rates were brought to low levels after 2008, the bond market has adapted to these changed and more favorable conditions by expanding the range of issuers.
Several states and companies, even with low ratings, have issued debt, thus creating riskier pockets of the market and also contributing to the rapid growth of the sustainable bond market (bonds linked to green and social projects).
With this premise, the OECD 2024 report specified that, after almost reaching the figure of 100 trillion dollars, the bond market for government and corporate bonds will grow further.
In detail: Total OECD government bond debt is expected to increase to $56 trillion in 2024, an increase of $30 trillion from 2008.
At the end of 2023, global corporate bond debt reached $34 trillion and more than 60% of the increase since 2008 came from non-financial companies.
Among the changes, the OECD also highlighted that the total amount of corporate and official sector sustainable bonds outstanding stood at $4.3 trillion at the end of 2023, up from $641 billion just five years earlier.
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In an environment of lots of debt being issued and rising interest rates, “around 40% of sovereign bonds and 37% of corporate bonds globally will mature by 2026, requiring further borrowing from markets at higher interest rates” .
The alarm then went off.
It should also be highlighted that the public debt/GDP ratio in OECD countries reached 83% at the end of 2023, adding 30 percentage points compared to 2008.
Why there is alarm about global indebtedness OECD Secretary General Mathias Cormann does not minced words to illustrate the serious risks facing the global economy and finance with such high debt levels: A new macroeconomic landscape characterized by higher inflation and tighter monetary policies is transforming bond markets globally at a pace not seen for decades.
This has profound implications for public spending and financial stability at a time of renewed financing needs.
Public spending needs to be more targeted, with a greater focus on investment in areas that drive increased productivity and sustainable growth.
Market supervisors need to closely monitor both debt sustainability in the corporate sector and overall exposures in the financial sector.
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What to expect? The vulnerability of debt issuers is increasing and this sounds like a warning for financial stability.
Just think that, as highlighted by the OECD, 2023 ended with 53% of all investment grade issues by non-financial companies belonging to the BBB rating (the lowest).
The share of bonds with a BBB rating and a debt/EBITDA ratio above 4 – an indicator of high financial leverage – was also 42%, compared to 11% in 2008.
The debt issue risks not finding a solution and trap economic development for many more years.