Editorial
Sovereign and corporate bond markets are at the centre of the global financial system. At a combined value of almost USD 100 trillion, they are similar in size to global GDP. Following decades of expansion, a rapidly changing macrofinancial landscape is now presenting the most significant test to these markets in a generation.
The extended period of historically low interest rates that enabled the widespread growth of global debt and the expansion of riskier market segments has come to an end. Higher policy rates, quantitative tightening and heightened geopolitical tensions are having substantial impacts. Refinancing needs are considerable. Today’s bond markets are also characterised by a growing universe of more price sensitive investors.
These dynamics combine to form a key consideration: making sure that debts that were manageable in a low-interest rate environment, where central banks were buyers, are not rendered unsustainable in this new reality.
At the same time, borrowing needs are higher than ever. Demographic changes, slowing economic growth and decarbonisation will require the mobilisation of tens of trillions of dollars. Successfully managing this might be the defining issue facing the global economy.
It is against this backdrop that the OECD is launching this new annual report, which examines key challenges policy makers face in working to safeguard the functioning of bond markets and financial stability.
Over three separate chapters, this first edition paints a comprehensive picture of how global bond markets have developed in the last two decades and seeks to identify the build-up of risks and vulnerabilities. Recognising the high overall levels of indebtedness and the inherent interlinkages, it covers both sovereign and corporate bond markets. In addition, it studies the rapid growth of sustainable bond markets and the associated policy implications.
The global economy, and indeed the world at large, are facing great challenges. Bond markets will play a critical role in providing the funding needed to overcome them. Ensuring that they continue to function efficiently is essential, but it is also a considerable task that calls for shrewd and effective policy making.
One of the most important tools at our disposal in that endeavour is knowledge: navigating a difficult terrain is significantly easier with a good map. The overarching ambition of this report is to provide part of that map.
