On the National Debt

I wanted to write something on the National Debt as a constraint on fiscal policy, here are my confusing notes; which I added to in the winter of 2025.

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Links & News

UK signals expansion of short-term debt market in ‘radical’ borrowing shift at the FT (usual constraints); Liz Webster claims its going to make things worse, I am not so sure. One needs to understand the flexibility of the coupon yield. 28/11/2025

1. National Debt by country by the IMF
2. Public sector debt and money markets operations etc (including reserves) by the BoE, I say, “Why is the BoE data so impenetrable?”
3. Foreign Debt: Definition and Economic Impact from Investopedia – Excessive levels of foreign debt can hamper countries’ ability to invest in their economic future—whether it be via infrastructure, education, or health care—as their limited revenue goes to servicing their loans. This thwarts long-term economic growth.
4. Potential vulnerabilities from a rising stock of foreign-held debt, by the OBR
5. UK debt held by foreign investors, a series of charts, from 2003, to 2023, focusing on the proportion, which has been increasing but because domestic saving has collapsed. By Economics Help.

Gemini says

1. What are the negative effects of foreign owned debt ?
2. Show me the list of countries world wide ordered by foreign held public debt as a proportion of total debt? Can’t do that

After the ’25 Autumn statement

I decided to get to grips with the problem of high-yield bond prices, and found the following

1. Quantitative tightening and monetary policy stance − speech by Catherine L. Mann, prepared for the IF 75th anniversary conference in Washington DC. The Bank presents Ms Mann’s biography on their web site.
2. What is quantitative tightening and how has it affected UK finances? from the Guardian, explains that QE’s objective was to bring down yields by creating a demand for bonds. I thought it was to ease loans by swapping bank assets for cash.
3. Debt Management Report 2025-26 by the Treasury, they say, “The UK’s stock of index-linked debt stood at around £619 billion at the end of 2024, making up 24.5% of the government’s wholesale debt portfolio”
4. Index linked bonds depend on the RPI, which includes mortgage costs which depend upon market interest rates. This is potentially a vicious circle and certainly weakens the use of high interest rates as an anti-inflation measure.
5. Potential vulnerabilities from a rising stock of foreign held debt from the OBR
6. Household savings rates over time, from ONS
7. What is the market interest rate, see the Sonia benchmark from the Bank of England
8. How likely is HMG to default? See the CDS price historical data for the UK 5-year bond from world government bonds, and how to convert it to a risk ratio, the market has the risk ratio of UK default at 0.3% for one year and 1.3% over five years, so not very likely.

More …

1. Some leftist economic policies on macro, but references a debt ceiling via Rachel Reeves: Between a Rock and a Hard Place, by Simon Nixon at Bylines Times.
2. https://www.worldbank.org/en/programs/debt-statistics/ids from the World Bank
3. General Government Debt by the IMF the IMF page, with UK/US/Italy/Japan charted PSBR/GDP.
4. Public finances: Economic indicators HoC LIbrary, 20 June 2025