In Bangkok the refrain was simple: bond yields. Frederic Neumann, HSBC's chief Asia economist, distilled the mood into "Bond yields, bond yields, bond yields," and warned that if they keep rising at this pace, the past year's resilience in global growth "will quickly start to fray."
Since G20 finance chiefs met in Asheville six weeks ago, yields in the US, France and Japan touched levels not seen in decades. They've dipped over the past week or so, yet still sit well above their usual ranges. This year's inflation and rate pressures have been driven primarily by Trump's war on Iran, and numerous attendees in Bangkok - among them IMF chief Kristalina Georgieva - contended that sizable budget deficits and debt loads are exacerbating the problem. She labeled advanced economies the "worst offenders" and urged them to repair their public finances.
Bankers saw the same risk to balance sheets. Echoing that view, JPMorgan's EMEA unit vice chairman Andreas Lindh remarked, "Sovereign risk was raised in almost every conversation." "The combination of high sovereign indebtedness, large budget deficits, surging government bond yields and no clear signs of fiscal consolidation in several major countries is cause for concern." The IMF's latest financial stability assessment struck a similar tone, calling the yield surge the biggest current risk.
At the previous big gathering, Scott Bessent led the charge to portray China as creating perilous rifts in the global economy. With the US Treasury chief not in Bangkok, the glare turned to America and its partners. According to one senior government official, with Bessent not in the room it became vital that partners such as Europe or Canada be present so China wouldn't step into the vacuum.
On Friday, Erin Browne - the Treasury undersecretary for international affairs - stated that the US is pressing the IMF on its "responsibility to address global imbalances and exchange rate policies." Her message was direct: "The fund must be more assertive in identifying these distortions and addressing the beggar-thy-neighbor policies that contribute to them."
In Asheville, Bessent described a 19 to 1 lineup against China, saying that aside from Beijing, everyone agreed that "non-market-based economies pushing out a never-ending stream of cheap exports is not sustainable." But in Bangkok the chatter centered on higher debt costs and questions around Trump's policies, a turn that strengthens Beijing's hand in the debate over global imbalances. Japanese officials tried to tamp down talk of a split between developed and emerging economies over yields. Finance Minister Satsuki Katayama noted that international institutions highlighted possible spillover risks, yet stopped short of urging concrete steps. She also rebuked a Nikkei report of a pre G20 clash with China, and said G7 finance ministers discussed imbalances, an issue on which "China was effectively called out" in Asheville.
The G20 did not attempt to draft a statement or hold a press conference this week.
When global shifts can feel distant and complex, sign up for the free Market Briefs to get the economy explained in minutes
While the US and other advanced economies blamed China's huge export surplus for harming others, Beijing countered with data and a policy paper. New trade figures released during the meetings point to yet another record year. And the People's Bank of China issued a report just before the IMF gatherings, asserting that US policy missteps - including excessive fiscal spending - have eroded its trade competitiveness. Imbalances "are not caused by surplus countries or deficit countries acting alone," it wrote. "Each country should do its homework."
Following the meeting of G20 finance chiefs in Bangkok on Thursday, PBOC Governor Pan Gongsheng said "sharp swings in some countries' government bond markets" are increasing financial fragility. The IMF chief offered a balanced formula when asked about causes and cures this week: "China needs to spend more, the US has to save more, and Europe has to invest more." In her curtain raising speech last week, Georgieva put rising debt and borrowing costs among her three priorities for Bangkok, alongside AI and the energy crunch, but did not list trade imbalances. The IMF's stability report on Tuesday likewise said the surge in yields has become the biggest risk.
Georgieva also cast doubt on Bessent's idea that the US can simply grow out of its debt and deficit problems, suggesting that approach likely will not work, which poses a challenge for the rest of the world.
The bond selloff has hit advanced economies hardest, but the ripple effects are raising funding costs across emerging markets. "We do call out to all economies in the world, especially the advanced economies, to really look at the impact," said Indonesia's Finance Minister Suahasil Nazara, adding that a downgrade warning from MSCI Inc. triggered the steepest Friday stock decline in his country in 28 years. "The impact is to the local people, the people on the street, the people in the villages, that they will have to endure higher borrowing costs."
Kenya's central bank governor, Kamau Thugge, reported that the nation's dollar bond yields rose roughly 100 basis points over three weeks. Kenya aims to raise $5.4 billion; as recently as three weeks ago, he said, "we'd have said that the market is ready for us to go," he said. "But the conditions are changing so fast." The main risk, in his view, is the war in the Middle East, adding that "oil prices can go to $130. Who knows?"
The rise in yields threatens several African countries that "don't really have capacity for shocks," said Luvuyo Masinda, who is in charge of Standard Bank Group's commercial and investment-banking arm, and he listed economies "teetering" near default or in danger of hitting it. Global banks had a visible presence in Bangkok, with JPMorgan and Deutsche Bank hosting receptions at top hotels, and Gulf International Bank's delegation at the Four Seasons arriving with at least six BMWs.
What this means for your portfolio Higher yields and hefty deficits have become the market's center of gravity. Officials and the IMF linked them to growing sovereign risk and the chance of spillovers from rich countries to emerging markets, while China seized the moment to argue that the US needs to tighten its fiscal stance. Watch for signals from Washington and Beijing, headlines from the Middle East that move oil, and any hint of fiscal consolidation - the same levers investors kept checking on their phones in Bangkok.
Because staying informed shouldn't take hours, subscribe to Market Briefs newsletter for a clear daily update on the economy and markets
