Why government bond rates just hit a 15-year high
Australia's government bonds now pay over 5% interest, a 15-year record, because rising global debt forces governments and companies to offer higher rates to attract investors.
When governments spend more than they earn, they borrow by issuing bonds. Investors buy these bonds for the interest they pay.
With US debt above $40 trillion and Australia's federal debt past $1 trillion, governments are issuing far more bonds than before. More supply means they must offer higher rates to attract buyers.
At the same time, some investors worry about whether these debts can ever be repaid, so they demand even higher rates. The US, UK, and Australia all hit multi-decade highs this week.
- Over 5%
- Australia bond rate
- 15-year high
- Record timeframe
- More than $40 trillion
- US national debt
- Past $1 trillion
- Australia federal debt
Why it mattersHigher bond rates mean governments have less money left for spending on services or tax cuts.
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