Governments globally to turn to non-dollar bonds amid AI-driven liquidity crunch, Citi banker says
TLT•Governments and state entities are increasingly raising funds in non-dollar bonds as competition for capital raises borrowing costs, a Citi banker said. She cited interest in local-currency debt and said rising yields and AI infrastructure funding are crowding out developing countries.
1. Non-dollar funding grows
Governments and state entities are increasingly raising funds outside dollar-denominated bonds as competition for capital increases debt issuance costs, Citi global head of public sector group Stephanie von Friedeburg said. She said public and private issuers are showing interest in local-currency markets including the Chinese renminbi, Australian dollar, Hong Kong dollar and Singapore dollar.
2. Borrowing pressures mount
Von Friedeburg said governments need to borrow while private capital is chasing AI-driven opportunities, creating competition for a limited pool of capital. Benchmark 10-year government bond yields in the 10 largest developed economies have risen by an average of 81 basis points so far this year, Fitch said earlier this week.
3. Developing markets squeezed
Von Friedeburg said developing countries face crowding out as yields rise and private capital funds AI infrastructure, adding that they already have heavy debt-service burdens and zero fiscal space. She said debt-for-development swaps could help fund essential energy, transport and digital needs, and that reserve managers are exploring ways to manage gold reserves as prices rise.
