“World governments are issuing more debt than ever,” commented the Kobeissi Letter over the weekend.

Global sovereign bond issuances hit a record $18 trillion last year, and $16 trillion of that debt was issued by developed countries.

Additionally, global government bond issuance has nearly doubled since 2019 on an unsustainable debt trajectory, it noted.

“Historically high public spending on social programs and defense, new tax and spending policies, as well as elevated interest rates, have been behind this massive surge.”

World governments are issuing more debt than ever:

Global sovereign bond issuances hit a record ~$18 TRILLION in 2024.

~$16 trillion of debt was issued by developed countries, and ~$2 trillion by emerging market economies.

World government bond issuance has nearly DOUBLED… pic.twitter.com/X0QxXwtdIo

More Debt More Bonds

Government bonds are a way for nations to raise money by issuing interest-earning debt securities to finance public spending.

As debt surges, more of it needs to be refinanced, which means more bond buyers are needed, which puts pressure on the bond markets.

On June 6, the Financial Times reported that investor demand for long-term government debt is weakening, as evidenced by recent auctions of 20-year bonds in Japan and the US, which were poorly received, triggering sharp price drops and rising yields.

Prominent investors such as BlackRock’s Larry Fink and billionaire hedge fund manager Ray Dalio warned of unsustainable deficits, especially in the US, which is considering a $2.4 trillion debt increase, prompting fears of a path to insolvency.

Long-term bond yields serve as benchmarks for corporate debt, and higher yields will raise borrowing costs for businesses, risking growth. Additionally, a debt market dominated by hedge funds and short-term players may become more volatile.

Bitcoin The Beneficiary

Store-of-value assets like Bitcoin could benefit significantly from the unfolding global bond market strain and loss of faith in sovereign debt.

If government debt becomes less attractive due to high yields, poor auction performance, and credit rating downgrades, investors may seek alternatives to store capital.

Governments may also increasingly rely on inflation to erode the real value of debt, and BTC has often been considered an inflation hedge.

Being non-sovereign and decentralized, Bitcoin also offers a parallel financial system that is immune to political manipulation or debt monetization.

As countries and investors diversify away from US Treasuries and the dollar, Bitcoin could also be part of a new neutral reserve asset basket, especially in emerging markets.

The asset was holding steady at around $105,500 at the time of writing, having recovered from its Friday dip to $101,000.BTC has gained more than 50% over the past 12 months.