Sovereign bond markets continued to be impacted by rising issuance volumes in 2025, with a growing role for more price-sensitive investors. Both leveraged funds and foreign entities are now the marginal buyers in certain key markets. At the same time, the implications of current fiscal trajectories for debt sustainability are a concern. This, along with changing preferences from important investor groups, has led to higher long-term yields even as policy rates have continued to fall.
This session will explore the latest trends in sovereign bond markets, which are currently absorbing near record levels of net issuance. As many investors’ appetite and ability to buy is stretched, new buyers have emerged, bringing much needed liquidity which has supported sovereign issuers, particularly around auctions and syndications. However, their growing role, particularly of leveraged and foreign buyers, could pose risks to market stability. The session will also assess how sovereign issuers are adapting to this changing investor base, what it means for their issuance strategies, and the trade-off they must make between cost and risk.
