World’s top 10 bond markets near $100trn

•Nigeria raises N7.62trn in eight months

THE world’s 10 largest government bond markets are closing in on a historic $100 trillion milestone in total size, driven by nearly $30 trillion in annual new issuance as governments worldwide lean heavily on debt to fund spending.

The surge reflects a new era of intense competition for capital, with several notable trends emerging: a crowding-out effect from increased sovereign issuance, a higher-yielding trap for developed nations, a growing shift toward fragmented and local capital pools, and index inclusion by larger emerging markets such as China and India becoming a competitive lever.

According to Bloomberg data as of August 26, the United States leads with $35.4 trillion outstanding, followed by China at $19.1 trillion and Japan at $17.8 trillion. The United Kingdom stands at $3.9 trillion, France $3.8 trillion, Italy $3.1 trillion, Germany $2.9 trillion, India $2.9 trillion, Canada $2.8 trillion, and Brazil $2.0 trillion. These figures underscore the sheer scale of government borrowing and the mounting pressure on global capital markets.

Similarly, available records show that the global trend is playing out strongly in Nigeria. The Debt Management Office (DMO) has raised N7.62 trillion through Federal Government of Nigeria (FGN) bonds across eight primary market auctions conducted from the beginning of the year to August 2026.

This domestic fundraising has played a significant role in financing the federal government’s budget deficit, estimated at about N31.5 trillion. Investor appetite remains firm despite the aggressive borrowing push, though auction records show tighter subscriptions for bonds compared with Treasury bills.

Higher spot rates on Nigerian Treasury bills continue to shape market activity, leaving the yield curve inverted, with short-term instruments offering higher returns than longer-duration bonds. This dynamic has influenced buying patterns and highlighted the challenges of balancing short-term funding needs with longer-term debt sustainability.

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The DMO has also moved to correct recent misreporting regarding debt service. Publications claiming the Federal Government spent N611.71 billion in March 2025 on its first-ever FGN US dollar-denominated bond issued in the domestic market were inaccurate. The correct figure for debt service on the US dollar bond in the first quarter of 2025 was N67.988 billion. The N611.71 billion figure actually represented total debt service on all outstanding FGN bonds excluding the dollar-denominated instrument. No principal repayment has been made on the dollar bond, which matures in full in 2029.

In parallel, Nigeria has diversified its funding sources through a USD 5 billion Total Return Swap facility with First Abu Dhabi Bank PJSC. The six-year instrument, recently approved by the Federal Executive Council and the National Assembly, allows the government to access dollar liquidity against naira-denominated FGN securities posted as collateral at 133.3 percent over-collateralisation. Proceeds are earmarked for budget implementation, priority infrastructure, refinancing of costlier debt, and other urgent needs. Drawdowns will occur in phases by mutual agreement and will be reflected in the DMO’s public debt statistics.

Taken together, the rapid expansion of the world’s largest bond markets and Nigeria’s substantial domestic fundraising illustrate how governments are navigating an era of elevated debt needs. While investor demand has so far supported these efforts, the rising scale of issuance raises questions about long-term crowding-out effects, interest-rate pressures, and the sustainability of public finances both at home and abroad.