The International Monetary Fund warned Tuesday that rising inflation, mounting debt and AI-related borrowing could push government bond yields up in a "disorderly" spike across the global economy.
The warning comes from the fund's latest Global Financial Stability Report, which flags the potential for "a sharp rise in sovereign bond yields." Yields in several advanced economies have already climbed to multidecade highs. Higher energy costs from the Middle East conflict are one driver, along with expectations that central banks will tighten monetary conditions to curb resurgent inflation.
The IMF also said last week that global public debt had reached near its highest level since World War II. It is on track to soon exceed 100% of GDP.
A sharp rise in yields would mark down asset values through higher discount rates, including AI-related assets. It would also erode the value of government bonds posted as collateral. The global economy has held up better than expected so far, because the AI investment boom offsets some of the energy shock. Silvana Tenreyro, economic counsellor and director at the IMF research department, said "the global economy has been resilient, but that resilience is reaching its limits."
DBS Bank CEO Tan Su Shan calls Singapore a predictable market where "boring is not bad," and the IMF's warning makes that line land differently.
Common questions
What did the IMF warn about?
- The IMF warned Tuesday that rising inflation, mounting debt and AI-related borrowing could push government bond yields up in a "disorderly" spike across the global economy. The warning comes from its latest Global Financial Stability Report, which flags the potential for "a sharp rise in sovereign bond yields."
Why are government bond yields rising?
- Higher energy costs from the Middle East conflict are one driver, along with expectations that central banks will tighten monetary conditions to curb resurgent inflation. Yields in several advanced economies have already climbed to multidecade highs, according to the IMF's latest Global Financial Stability Report.
How high is global public debt right now?
- Global public debt is near its highest level since World War II, the IMF said last week. It is on track to soon exceed 100% of GDP. That matters because the IMF's latest report warns mounting debt, along with inflation and AI-related borrowing, could push bond yields up in a disorderly spike.
