In view of the inflationary pressure, interest rates on the international financial markets have risen at record speed since the beginning of the year.

Some fund managers are now talking about a “bond crash”.

In the global economy, ever higher interest rates have to be borne, and that with debt at a record level.

As the world banking association Institute of International Finance (IIF) now reports, the debts of all states, banks, companies and households rose by 3.3 trillion dollars to 305 trillion dollars in the first quarter.

Markus Fruehauf

Editor in Business.

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The United States and China in particular have contributed to this.

American liabilities rose by $1.8 trillion and China's by $2.5 trillion, according to the IIF figures.

A positive exception is the euro zone, where debt has fallen for the third quarter in a row.

The decline in liabilities measured against global economic output (gross domestic product, GDP) is pleasing.

At 348 percent of GDP, the debt ratio at the end of March was 15 percentage points lower than in the same period last year, according to the IIF.

The reason for this was the higher growth in the global economy.

In recent years, the corona pandemic has forced governments to support the economy with large amounts.

This, in turn, increased the debt.

In the first quarter, the IIF once again named government borrowing as a key reason for the increase.

But companies have also used the favorable interest rate environment during the corona pandemic to take out debt.

Their liabilities have increased by $14 trillion since 2019.

Debt drivers corona pandemic

According to IIF statistics, non-bank liabilities have increased by $40 billion to $236 trillion since the beginning of the Corona wave.

Of this, $88.3 trillion is accounted for by states, $90.6 trillion by businesses and $57.0 trillion by households.

Bank debt was $69.4 trillion at the end of March.

While the IIF debt statistics are a good indication of world debt, they overstate the actual burden because they include bank debt.

On the other hand, however, they grant loans to states, companies and households or hold their bonds.

Therefore double counting can inflate the debt statistics.

Similar to the Bank for International Settlements (BIS), which is considered the bank of central banks, the IIF counts debt at market value but not at face value.

But the debtors have to repay the nominal value.

After the sell-off in the bond markets, their prices have fallen significantly, causing their yields to rise.

A ten-year federal bond is currently only being traded at around 90 percent of its nominal value.

But in the end, the federal government has to repay 100 percent.

Low transparency in emerging markets

Debt growth is very strong in the emerging markets, where the economies without sources of raw materials are particularly under pressure due to the Ukraine war and rising energy and food prices.

At $98.7 trillion, emerging market debt is not far off the $100 trillion mark.

The IIF warns of hidden debt in emerging markets.

There, public sector liabilities are reported with a time lag, contingent liabilities are only reported to a very limited extent and confidentiality clauses are used very liberally.

Soaring interest rates are a major concern for the association as government debt has increased by $17.4 trillion in the pandemic.

In particular, emerging markets with little room for maneuver could face challenges if social tensions loom in the face of rising energy and food prices.

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