Global debt has reached a record $353 trillion by end-March, marking the fastest quarterly increase since mid-2025, according to the Institute of International Finance's quarterly Global Debt Monitor. The $4.4 trillion increase in the first quarter was driven primarily by Washington's borrowing push, with the US Treasury market expanding by $30 trillion. However, global debt ratios remained broadly stable at 305% of world economic output, unchanged since 2023. As reported by the IIF, the rise in US debt has been largely driven by government borrowing, with Chinese non-financial corporate borrowers also showing sharp acceleration at the start of the year. The latest IIF report indicates that Washington's borrowing push was one of the main drivers for global debt to rise by over $4.4 trillion in the first quarter, representing the fifth straight quarterly increase.
Central banks are increasingly diversifying their reserve portfolios away from traditional safe havens, with 42.1% of 95 central banks making changes to their USD portfolio composition in the last 12 months. According to the latest survey results, net 13 central banks increased exposure to US Treasuries while 11 increased exposure to sovereign, supranational and agency bonds. Notably, 9 central banks reported intending to move into corporate bonds, with 25.2% of respondents considering increasing their exposure to the dollar over the next 12 months. However, 27.2% are considering decreasing their dollar exposure, indicating a measured approach to diversification. As reported by reserve managers, "there appears to be a move to diversify reserves away from a large reliance on the US dollar, mainly as a way to spread risk and strengthen resilience." The trend reflects widening differences in fiscal outlooks among major economies as a key driver of changing investment patterns, with central banks increasingly viewing safety during stress as coming from a mix of assets, not just one currency.
Despite diversification trends, the US dollar remains the primary safe-haven currency due to its unmatched liquidity, depth of markets and role in global trade and finance. According to the latest survey, 23.2% of reserve managers strongly agree and 56.8% agree that the dollar maintains its safe-haven status, though attacks on the Federal Reserve's independence may shake confidence. A reserve manager noted that "in periods of stress, investors still prioritise the ability to move large sums instantly without market disruption – something no alternative matches." However, 32.9% of central bank reserve managers think US bonds will outperform other Group of Seven economies and China this year, down from 54.3% in 2025, reflecting reduced confidence in US monetary policy. The US bond market has suffered significant markdown in investor confidence, with 28 out of 85 respondents thinking US bonds will outperform other major economies, compared to 71.1% in 2024. A key concern is "too much political uncertainty in the US for the dollar to be really safe while Trump is in office," as stated by a eurozone official.
Despite mounting geopolitical tensions and shifting government bond preferences, the US corporate bond market remains resilient with strong demand supported by AI-related issuance and continued overseas inflows. As reported by the Institute of International Finance, this strength has persisted despite the surge in oil prices since the end of February, when the US attacked Iran, disrupting Middle East exports. The analysts noted that Middle East tensions have had limited spillovers beyond energy markets to date, with global risk appetite recovering quickly after an initial hit. The IIF report confirms that US corporate bond markets continue to boom, with the strength supported by AI-related issuance and strong overseas inflows, even as government bond preferences shift toward Japanese and European alternatives. The survey results show that central banks are broadly split on whether stablecoins will drive demand for US Treasuries, with 54.4% questioning the proposition and 30.0% disagreeing, suggesting much depends on developing stablecoin credibility.
Emerging market sovereign bond issuance continued at a record pace, with high-yield issuers like the Democratic Republic of Congo selling global bonds for the first time in April. According to the report, Ecuador is expanding two previous offerings on Wednesday and Bolivia is expected to borrow in the coming days. The IIF warned that the Middle East conflict stands to increase the nearly $353 trillion global debt stock as higher energy and food prices force governments to borrow more and at higher cost. Outside the world's two biggest economies, debt across mature markets edged lower, while emerging markets excluding China saw levels rising modestly to a record $36.8 trillion. The survey reveals that central banks are split on whether the renminbi has become a more attractive currency, with 52.2% agreeing and 47.8% disagreeing that it has become less attractive. Most expect the renminbi's share of global reserves to reach 4% or higher by 2035, though one-third of central banks do not expect to invest any of their reserves in the renminbi by then.
