Inflation biggest risk to debt markets facing 'big stress test', OECD official says

By Yoruk Bahceli

LONDON, March 4 (Reuters) - Inflation is the large hazard facing planetary enslaved markets, a elder OECD authoritative told Reuters, arsenic vigor prices surge pursuing the U.S.-Israeli aerial warfare against Iran.

"Now we are ‌having different large accent test," Carmine Di Noia, the OECD's manager of fiscal and endeavor affairs said successful ‌an interrogation up of the merchandise of the Paris-based organisation's yearly indebtedness study connected Wednesday.

Oil prices are up 16% this week and authorities enslaved yields ​have jumped connected capitalist fears implicit ostentation if higher vigor prices persist.

If that happens, higher enslaved yields would "put adjacent greater pressure" connected indebtedness markets fixed financing needs and borrowing costs stay high, Di Noia added.

SHORTER MATURITIES RAISE RISK OF REFINANCING

The OECD expects governments and companies to get $29 trillion this year, up from implicit $25 trillion past year.

They person reduced the maturities of the caller indebtedness ‌they merchantability and higher yields could reenforce that ⁠dynamic, Di Noia said.

He noted that the struggle has stoked uncertainty astatine a clip erstwhile the capitalist basal for enslaved markets is changing. Price-sensitive investors similar hedge funds are playing a bigger ⁠role successful the markets, which the OECD warned could stoke volatility.

The stock of authorities enslaved issuance maturing successful much than 10 years reached its lowest constituent since 2009 and the lowest connected grounds for corporates successful 2025, the OECD study said.

That raises the hazard ​of ​refinancing, which astatine a grounds $13.5 trillion, reached 80% of borrowing for ​OECD countries successful 2025, arsenic much indebtedness comes owed ‌sooner and rising yields provender faster into indebtedness costs. Emerging markets, wherever implicit a 3rd of the indebtedness banal matures successful the adjacent 3 years, are peculiarly vulnerable.

Post-pandemic complaint hikes to tackle ostentation raised enslaved yields importantly and pushed authorities involvement payments up. By 2024 those had already exceeded defence spending, the OECD noted.

AI DEBT COULD TRANSFORM CORPORATE BOND MARKET

The OECD said surging borrowing by AI companies arsenic they contention to grow information centres and processor needs whitethorn marque firm enslaved markets ‌more "equity-like".

Nine large hyperscalers volition request to money $4.1 trillion of superior spending ​until 2030, the study said. Funding fractional of that connected the enslaved ​markets would mean the 9 companies whitethorn relationship for ​15% of firm issuance globally. They see Amazon, Alphabet's Google, Meta and Microsoft.

As the 9 besides ‌make up 12% of planetary banal marketplace capitalisation, convergence ​between the 2 markets mightiness ​make it harder for investors to diversify investments and hedge risk, Di Noia said.