At Any Rate
Global Rates - 2025 Global government issuance outlook
Jan 17, 2025
Jay Barry, Head of Global Rates Strategy at J.P. Morgan, and Aditya Chordia, European Rates Strategist at J.P. Morgan, dive into the future of government bond issuance. They discuss the pressing impact of central bank quantitative tightening and the implications of budget deficits on term premiums in the U.S. and U.K. The duo also explores how political changes are reshaping U.S. fiscal strategies and analyze yield movements amidst evolving market dynamics in Europe and Japan. It's a fascinating look into global financial trends!
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Quick takeaways
- The anticipated $2.6 trillion government bond issuance in 2025 underscores the challenges of widening fiscal deficits and central bank quantitative tightening.
- Political dynamics, particularly in the Euro area, may influence sovereign issuance trends and shift preferences toward shorter maturity securities.
Deep dives
Fiscal Deficits and Government Bond Supply
Fiscal deficits and the supply of government bonds have become increasingly significant concerns among investors. Recent trends indicate that many developed market countries are experiencing widening budget deficits, which continue to persist even years after the pandemic. The anticipated issuance for 2025 is approximately $2.6 trillion in conventional coupon bonds, reflecting an 8% slowdown from 2024 levels. Central bank quantitative tightening is further complicating this landscape by returning government bonds to private hands simultaneously with ongoing heavy issuance.
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