Debt servicing costs for OECD governments have reached their highest level since 2007, surpassing spending on defense and safety services. The US led OECD gross borrowing in 2024. Interest payments have been a significant burden on government budgets since 2007, with debt financing costs outweighing expenditure on defense, public safety, and housing in various nations.

The Organization for Economic Cooperation and Development noted that debt servicing costs represented 3.3% of GDP across 38 member countries, up from 2.4% in 2021. Rising bond yields in key sovereign markets and increased sovereign and corporate debt have raised concerns about higher costs and debt risks limiting future borrowing capacity when investment needs are at an all-time high.

The trend of escalating debt levels has raised alarms among bond traders, warning of unsustainable interest expenses that could lead to a crisis in the future. Nations raised interest rates post-pandemic to combat inflation, resulting in increased borrowing costs. The US, one of the top five OECD debt issuers, accounted for over two-thirds of the organization's gross borrowing, with interest payments making up 4.7% of US GDP in 2024.

Market experts like Ray Dalio have long cautioned about the growing debt levels. Government interest payments have prompted actions such as Elon Musk's decision to reduce federal departments and programs due to the escalating cost of debt interest payments surpassing the entire military budget.

The impact of Musk's actions on debt reduction and their ability to counter the Trump administration's planned tax cuts remains uncertain. Despite global bond traders closely monitoring the situation, governments have not made significant efforts to curtail debt levels, leading to concerns among investors. Unsustainable fiscal policies have previously caused bond traders to sell off government bonds, resulting in increased yields globally. This indicates a lack of appetite among sellers, highlighting the risks if governments do not address their escalating debt levels.