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Investors are warning governments around the world over “unmoored” levels of public debt, saying excessive pre-election borrowing promises risk sparking a bond market backlash. Government debt issuance in the US and the UK is expected to soar to the highest level on record in the coming year, with the exception of the early stages of the Covid pandemic. Emerging markets are set to add to the deluge of bond sales, after government debt climbed to an all-time high of 68.2 per cent of GDP last year, according to the Institute of International Finance. Deficits are “out of control and the real story is that there’s no mechanism for bringing them under control”, said Jim Cielinski, global head of fixed income at Janus Henderson.

The UK, where an election is expected this year, is also on course for its second-highest year of debt sales, behind only 2020 when the Bank of England stepped in to hoover up supply during the early stages of the coronavirus pandemic. The IIF warned that a swath of elections and ongoing geopolitical frictions in the emerging world “raise concerns about increased government borrowing and fiscal discipline, including India, South Africa, Pakistan and the US.

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