Global bond stress exposes limits of neoliberal fiscal order

September 7, 2026 at 06:00 AM2 min

This digest was compiled by AI from multiple sources — links to the originals are below.

OECD governments and companies are expected to borrow about $29 trillion from bond markets in 2026, mostly to roll over existing debt. Japan's 10-year yield has risen above 3% for the first time in 30 years, while the US 10-year Treasury yield is near 4.8% and the 30-year yield has exceeded 5.3%. The simultaneous erosion of cheap Japanese capital and China's demand for US debt is raising borrowing costs for Washington.

Key Facts

OECD governments and companies are expected to borrow about $29 trillion from bond markets in 2026, mostly to roll over existing debt.
OECD central governments' outstanding bond debt has reached $61 trillion.
Japan's 10-year government bond yield has risen above 3% for the first time in 30 years.
The US 10-year Treasury yield is near 4.8%, and the 30-year yield has exceeded 5.3%.
The yen carry trade, estimated at $2 trillion, is unwinding as Japanese yields rise.

Bond Market Pressures

OECD governments and companies are expected to borrow about $29 trillion from bond markets in 2026, mostly to roll over existing debt. OECD central governments' outstanding bond debt has reached $61 trillion. Japan's 10-year government bond yield has risen above 3% for the first time in 30 years. The US 10-year Treasury yield is near 4.8%, and the 30-year yield has exceeded 5.3%.

Erosion of Global Capital Flows

For three decades, China bought US Treasuries and exported capital to developing countries while supplying goods to world markets. Japan exported its accumulated savings at low interest rates, and the US absorbed this capital as the world's largest consumer and center of the dollar-based financial system. The yen carry trade, estimated at $2 trillion, is unwinding as Japanese yields rise, reducing demand for US Treasuries and raising American borrowing costs. Washington wants to reduce dependence on China, bring industry back, and increase defense spending and public investment, but must do so on top of a debt burden exceeding $40 trillion.

Neoliberal Order Under Strain

Neoliberal doctrine held that markets allocate resources efficiently and fiscal discipline ensures stability, but states now face rising defense spending, aging populations, energy transition, climate investment, industrial policy, and AI infrastructure. Public debts are historically high and bond markets demand higher interest rates. The neoliberal prescription of budget discipline, spending cuts, and austerity further narrows already insufficient social demand, degrades public services, worsens income distribution, and fuels public anger.