Global Bond Markets Near $100 Trillion Milestone

The world’s 10 largest government bond markets are approaching a historic $100 trillion milestone, as governments turn increasingly to debt to finance public spending.

The expansion is being driven by almost $30 trillion in annual new issuance, creating stronger competition for available capital. The trend is also raising concerns about crowding out, higher borrowing costs in developed economies and growing reliance on fragmented local funding markets.

According to Bloomberg data as of August 26, the United States has the largest government bond market, with $35.4 trillion outstanding. China follows with $19.1 trillion, while Japan has $17.8 trillion.

The remaining markets are the United Kingdom ($3.9 trillion), France ($3.8 trillion), Italy ($3.1 trillion), Germany ($2.9 trillion), India ($2.9 trillion), Canada ($2.8 trillion) and Brazil ($2.0 trillion).

The figures highlight the enormous scale of government borrowing and the growing pressure placed on global capital markets.

Nigeria is also experiencing the wider increase in government borrowing. The Debt Management Office (DMO) has raised N7.62 trillion through Federal Government of Nigeria (FGN) bonds in eight primary market auctions between the beginning of the year and August 2026.

The fundraising has helped finance the Federal Government’s budget deficit, estimated at about N31.5 trillion. Investor demand has remained strong despite the increased borrowing, although auction records indicate tighter subscriptions for bonds than for Treasury bills.

Higher spot rates on Nigerian Treasury bills have continued to influence market activity. They have contributed to an inverted yield curve, where short-term instruments offer higher returns than longer-term bonds. This has affected investor buying patterns while highlighting the challenge of meeting immediate funding needs without undermining longer-term debt sustainability.

The DMO has also corrected reports about debt service on Nigeria’s FGN US dollar-denominated bond. Claims that the government spent N611.71 billion on the bond in March 2025 were inaccurate.

The correct debt-service figure for the dollar bond in the first quarter of 2025 was N67.988 billion. The N611.71 billion figure covered total debt service on all outstanding FGN bonds, excluding the dollar-denominated bond. The government has made no principal repayment on the dollar bond, which will mature in full in 2029.

Nigeria has also expanded its funding options through a USD 5 billion Total Return Swap facility with First Abu Dhabi  Bank PJSC. The six-year facility, approved by the Federal Executive Council and the National Assembly, gives the government access to dollar liquidity against naira-denominated FGN securities pledged as collateral at 133.3% over-collateralisation.

The proceeds will support budget implementation, priority infrastructure, refinancing of more expensive debt and other urgent needs. Drawdowns will take place in phases by mutual agreement and will be included in the DMO’s public debt statistics.

The rapid growth of the global bond markets, alongside Nigeria’s increased domestic borrowing, shows how governments are responding to rising financing needs. While investor demand continues to support new borrowing, the growing size of debt issuance raises concerns over crowding-out effects, interest-rate pressures and long-term public debt sustainability.

What could rising government borrowing mean for global interest rates and Nigeria’s debt sustainability?