Government Bonds: The New Risky Investment?
Update: 2025-12-03
Description
Government bonds, once deemed the safest investments, are now under scrutiny due to rising public debt and a fragile financial system. Debt levels in advanced economies are at post-WWII highs, with little expectation of decrease. The changing ownership of these bonds, now held by non-bank entities like pension funds and insurers, also poses risks. These entities often use complex funding structures and borrowed money, exposing them to significant risks if markets become unstable. Martin Wolf warns that the markets current sense of security is misplaced, and complacency could quickly turn into panic. He proposes regulating similar risks, requiring minimum collateral, and improving transparency to restore confidence in government finances.
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