UHERO: "Mortgage interest rates have risen back to early-2025 levels over the past month or so. We expect some moderation so that the rate on a 30-year fixed-rate mortgage averages about 6.7% next year and 6.6% in 2028."

Poolside's Read — The Self-Reinforcing Feedback Loop

Advanced economies now pay more each year to service their government bonds than the world spends on defense, artificial intelligence, or clean energy.

This dynamic creates a perilous debt-issuance spiral. As governments issue record-breaking volumes of sovereign debt to cover expanding structural deficits, bond markets demand higher yields as a risk reward.

With more than $30 trillion in global debt approaching maturity over the next 12 to 36 months, refinancing at today's higher rates will only intensify the pressure.

These elevated yields drive up the government's borrowing costs, further widening their deficits. Capital that might otherwise fund future economic growth and infrastructure is instead redirected toward past obligations.

Interest Costs Top Budget Spending
Tracking the rising costs of sovereign debt in 2026
$365T
Total global debt, first half of 2026
Interest costs exceed critical global investments
Advanced economies government bond servicing versus estimated global spending, 2025
Debt servicing$3.3T
  
Defense$3.1T
  
Artificial intelligence$2.6T
  
Clean energy$2.3T
  
High servicing costs risk trapping major economies in a cycle of large deficits.
Sources: Institute of International Finance.

Borrowing Slows
Accumulation eases as global debt climbs to a new high
$365.5T
Total global debt, first half of 2026
The pace of borrowing slows
Six-month global debt additions
First half of 2025+$21.0T
 
First half of 2026+$10.0T
  
The slowdown is attributed to higher interest rates, rising debt-service costs, and elevated energy prices.
Sources: Institute of International Finance.

Debt Surges in U.S. and China
Emerging markets drive the latest increase
Total outstanding debt
Current accumulation by market type
~$255.0T
Advanced economies
  
$110.6T
Emerging markets
China and the U.S. lead new accumulation
Debt additions in the first half of 2026
China+$4.8T
 
United States+$3.5T
  
Emerging markets (ex-China)+$1.7T
  
Sources: Institute of International Finance.

Countries with the Highest Debt-to-GDP Ratios
Top national debt burdens by absolute U.S. dollar volume, 2026
$36T–$40T
United States total debt burden, leading absolute sovereign obligations globally
Absolute sovereign debt across the largest economies
Total national debt volume in U.S. dollars
United States$38.0T
  
China$18.7T
  
Japan$11.3T
  
United Kingdom$4.1T
  
France$3.9T
  
While economies such as Japan maintain drastically higher debt-to-relative-GDP ratios, the United States and China lead by a wide margin in absolute dollar volume.
Sources: Institute of International Finance; International Monetary Fund.

The Wrap

Yields on medium- and long-term government bonds in the United States, Japan, France, and the United Kingdom have reached their highest levels in more than a decade.

The Institute of International Finance describes these mature economies as facing persistently large deficits and rising interest expenses—challenges once associated mainly with distressed emerging markets.

So far, investor demand for government debt has remained strong. However, the growing sentiment among analysts suggests that the era of inexpensive capital is not returning soon, and that financing plans made today should assume rates remain elevated.

Sources

UHERO Forecast for the State of Hawaiʻi: No respite from storms or oil prices · CNBC: Global debt tops $365 trillion · The Star: Led by China and US borrowing, the world now owes a record US$365 trillion · Forbes: Inside the world's debt rollover crunch · IMF DataMapper: General government gross debt