Rich nations now spend more on debt than defense -OECD

Sovereign debt markets face a “difficult outlook” in 2025, as countries continue to race to refinance existing debt amid higher bond yields and higher interest rates, the Organisation for Economic Co-operation and Development (OECD) warned in its latest Global Debt Report (pdf). Interest payments across the 38 OECD member countries hit 3.3% of GDP in 2024 — up from 3.0% in 2023 and reaching the highest level since at least 2007—surpassing the 2.4% spent on military budgets.

Governments are continuing to borrow to plug the gap: Governments and companies borrowed USD 25 tn globally from markets in 2024, nearly triple the amount in 2007, the report added. This is set to continue to rise this year, with governments alone forecasted to issue USD 17 tn in sovereign debt, up from USD 16 tn last year. Nearly half of all OECD sovereign debt will mature by 2027, a refinancing cliff that risks squeezing fiscal space as yields climb and investment needs surge.

The US saw a sharp rise in interest payments, rising to 4.7% of GDP, followed by Italy at 4.1% and the UK at 2.9% and France at 2.1%. Germany recorded the lowest burden, at just 1%.

The fix: With much of the past two decades’ borrowing used to recover from the 2008 financial crisis and the covid-19 pandemic, “now there are needs to shift from recovery to investment” on projects like infrastructure and climate, OECD Director for Financial and Enterprise Affairs Carmine Di Noia told the Financial Times. “Borrowing must increase growth” to help stabilize debt-to-GDP ratios.

Adding pressure, central banks are stepping back from debt markets. Their holdings have fallen by USD 3 tn since their 2021 peak, with another USD 1 tn drop expected this year. The shift toward “more price sensitive” private investors leaves governments more exposed to “heightened geopolitical and macroeconomic uncertainty,” Di Noia said.

MARKETS THIS MORNING-

Asian markets are — like Wall Street — cheering signs that US President Donald Trump’s planned tariffs might not be as severe as initially expected. Japan’s benchmark Nikkei is up 0.8%, while South Korea’s Kospi is up nearly 0.2%. China was the only outlier — with the CSI 300 trading flat and Hong Kong’s Hang Seng falling 1.06%.

Wall Street futures edged down only slightly, after all three major indices closed up yesterday.

THE CLOSING BELL: TADAWUL-

The TASI rose 0.7% yesterday on turnover of SAR 4.3 bn. The index is down 2.2% YTD.

In the green: Masar (+30.0%), Naseej (+9.8%) and East Pipes (+7.4%).

In the red: APC (-4.7%), MESC (-3.8%) and Care (-3.2%).

THE CLOSING BELL: NOMU-

The NomuC rose 0.3% yesterday on turnover of SAR 36.8 mn. The index is down 2.8% YTD.

In the green: Smile Care (+10.7%), Alrazi (+9.4%) and NBM (+8.6%).

In the red: Marble Design (-9.7%), Saudi Top (-8.5%) and Edarat (-5.4%).

CORPORATE ACTIONS-

Arabian Shield Cooperative Ins. Company opted not to distribute dividends for 2024, as the board recommended preserving the company’s solvency margin to support future development plans, according to a disclosure to Tadawul.

The United International Holding Company’s board recommended hiking the company’s capital to SAR 750 mn through bonus share issuance at a rate of 1.88 shares for every 1 share held, according to a disclosure to Tadawul. The increase will be financed by tapping SAR 500 mn from statutory reserves, additional capital contributions, and retained earnings, while an additional 3 mn shares will be allocated to the company’s employee stock program.

Saudi German Heath’s board recommended distributing SAR 46 mn in dividends for FY 2024 at SAR 0.50 per share, according to a disclosure to Tadawul. The distribution date is yet to be announced.