Global debt hits a record high of nearly $353 trillion, and the United States is heading down an "unsustainable path"!

Ask AI · Why are international investors starting to reduce their reliance on U.S. Treasuries?

Cailian Press, May 7 (Editor: Xiaoxiang) A report released by the Institute of International Finance (IIF) on Wednesday shows that as global debt levels reached a record high of nearly $353 trillion at the end of March, investors are beginning to show signs of diversification and reduced dependence on U.S. Treasuries.

The IIF’s quarterly “Global Debt Monitor” report states that since the beginning of the year, demand for Japanese and European government bonds in international markets has been steadily increasing, while demand for U.S. Treasuries has plateaued.

Emre Tiftik, Director of Global Markets and Policy at the Institute of International Finance, said during a webinar discussing the report, “This highlights that international investors are actively working to diversify their portfolios away from U.S. Treasuries.”

He added, “Although the U.S. Treasury market, with a size of over $30 trillion, is ‘currently not at risk,’ long-term forecasts indicate that U.S. government debt seems to be increasingly heading toward ‘unsustainability,’ while debt ratios in the Eurozone and Japan are currently declining slightly.”

“Recent market developments show early signs of portfolio diversification, especially in cross-border government securities investments,” the IIF team wrote, “these trends partly reflect divergence in debt trajectories.”

The report points out that under current policies, the U.S. debt-to-GDP ratio is expected to continue rising, while the U.S. corporate bond market remains robust supported by AI-related bond issuance and strong inflows of overseas capital.

The IIF report indicates that U.S. borrowing expansion was one of the main drivers behind the more than $4.4 trillion increase in global debt in the first quarter, marking the fastest growth since mid-2025 and the fifth consecutive quarter of growth.

Tiftik said that the growth in U.S. debt is mainly driven by government borrowing.

In terms of debt ratios, global debt currently accounts for 305% of global economic output, roughly unchanged from levels in 2023. However, the trend of debt ratios is similar to debt levels—declining in mature markets and steadily rising in emerging economies.

Overall, the IIF report shows that the countries with the largest debt increases during this period include Norway, Kuwait, Bahrain, and Saudi Arabia—whose debt-to-GDP ratios have each increased by over 30 percentage points.

The IIF predicts that structural pressures—including aging populations, increased defense spending, energy security and diversification, cybersecurity, and capital expenditures related to AI—will push government and corporate debt levels higher in the medium to long term.

The IIF also specifically mentions the ongoing U.S.-Iran conflict.

The IIF notes that so far, the tension in the Middle East has had limited spillover effects outside energy markets, but over time, this conflict could push the global debt scale, which is currently close to $353 trillion, even higher, as rising energy and food prices will force governments to borrow at higher costs.

“If the Middle East conflict persists, long-term price pressures will transmit to borrowing costs,” the IIF analyst wrote, “the risks are very real.”

(Cailian Press, Xiaoxiang)