The amount of debt globally has soared more than 40 percent, to$100 trillion, since the first signs of the financial crisis asgovernments borrowed to pull their economies out of recession andcompanies took advantage of record low interest rates.

The $30 trillion increase between mid-2007 and mid-2013 compareswith a $3.86 trillion decline in the value of equities to $53.8trillion, according to the Bank for International Settlements (BIS)and data compiled by Bloomberg. The jump in debt as measured by theBasel, Switzerland-based BIS in its quarterly review is almosttwice the U.S. economy.

Borrowing has soared as central banks suppress benchmarkinterest rates to spur growth after the U.S. subprime mortgagemarket collapsed and Lehman Brothers Holdings Inc.'s bankruptcysent the world into its worst financial crisis since the GreatDepression. Yields on all types of bonds, from governments tocorporates and mortgages, average about 2 percent, down from morethan 4.8 percent in 2007, according to the Bank of America MerrillLynch Global Broad Market Index.

“Given the significant expansion in government spending inrecent years, governments—including central, state, and localgovernments—have been the largest debt issuers,” said BranimirGruic, an analyst, and Andreas Schrimpf, an economist at the BIS.The organization is owned by central banks and hosts the BaselCommittee on Banking Supervision, which sets global capitalstandards.

In the six-year period to mid-2007 global debt outstandingdoubled, to $70 trillion from $35 trillion, according to datacompiled by BIS.

Marketable U.S. government debt outstanding has soared to arecord $12 trillion, from $4.5 trillion in 2007, according to U.S.Treasury data compiled by Bloomberg. Corporate bond sales globallysurged during the period, with issuance totaling more than $21trillion, Bloomberg data show.

Concerned that high debt loads would cause internationalinvestors to avoid their markets, many nations resorted toausterity measures of reduced spending and increased taxes,sacrificing their economies as they tried to restore the fiscalorder they abandoned to fight the worldwide recession.

“To get out of debt, you need prudence and you need pro-growthstructural reforms,” said Holger Schmieding, chief economist atBerenberg Bank in London. “Those are long-term processes. You can'tget out of debt too quickly, or your economy collapses, as we sawin Greece.”

Bond Returns

Adjusting budgets to ignore interest payments, the InternationalMonetary Fund (IMF) said late last year that the so-called primarydeficit in the Group of Seven countries reached an average 5.1percent in 2010 when also smoothed to ignore large economic swings.The measure will fall to 1.2 percent this year, the IMFpredicted.

The unprecedented retrenchments between 2010 and 2013 amountedto 3.5 percent of U.S. gross domestic product and 3.3 percent ofeuro-area GDP, according to Julian Callow, chief internationaleconomist at Barclays Plc in London.

Rising debt did little to diminish demand for fixed-incomeassets. Bonds worldwide have returned 31 percent since 2007,including reinvested interest, according to Bank of America MerrillLynch index data. Treasury and agency debt handed investors gainsof 27 percent, while corporate bonds returned more than 40 percent,the indexes show.

“Total debt levels, the sum of household, government andcorporate debt, haven't declined at all in recent years,” said BenBennett, a credit strategist in London at Legal & GeneralInvestment Management (LGIM), which oversees the equivalent ofabout $120 billion of corporate bonds. “Each time there's a wobble,the central banks turn on the taps. Either that works by creatinggrowth with asset prices eventually coming into line withfundamentals, or it doesn't and we're in for a massive fall.”

Bond investors haven't penalized sovereign issuers such as theU.S., U.K., Japan, and France for losing their top credit ratings.While Standard & Poor's stripped the U.S. of its AAA ranking inAugust 2011, Treasuries moved in the opposite direction from whatthe downgrade suggested and yields touched a record low of 1.38percent in 2012.

In the U.K., where ratings were cut one level to Aa1 from Aaa inFebruary 2013 by Moody's Investors Service, 10-year Gilt yieldsfell 26 basis points to 1.85 percent in the month after thedowngrade.

Yields on U.S. government bonds have dropped 2.3 percentagepoints since 2007 to an average 1.6 percent, according to Bank ofAmerica Merrill Lynch bond index data. Corporate yields havedeclined 2.6 percentage points to 2.9 percent.

Faster growth is deflecting concern about high debt loads. Inthe U.S., the government will borrow less money this year than atany time since 2008, validating the nation's decision to go deeperinto debt to combat the financial crisis as a stronger economyshrinks the deficit, based on a January survey of the Wall Street'sbiggest bond dealers.

The government will sell $717 billion of notes and bonds on anet basis, 14 percent less than last year, according to a survey ofprimary dealers which are obligated to bid at Treasury auctions.Issuance has fallen every year since the U.S. borrowed a record$1.607 trillion in 2010, data compiled by the Securities Industryand Financial Markets Association show.

Unprecedented Stimulus

Helped by the Federal Reserve's unprecedented stimulus, theObama administration's deficit spending has enabled the Americaneconomy to recover faster from the first global recession sinceWorld War II than European countries that chose austerity.

Faster economic growth and falling unemployment in the U.S. haveslowed the build-up of debt as a proportion of GDP to 70 percent,less than two-thirds the debt-to-GDP ratio of the 24 developednations tracked by Bloomberg. The jobless rate was 6.7 percent inFebruary, government data showed last week, down from 7.7 percent ayear earlier.

Higher corporate and individual tax receipts have prompteddealers in the Bloomberg survey to predict the U.S. budget deficitwill decline by about $50 billion to $629 billion, the least since2008.

Smaller deficits may be short-lived because government costs forretirement and health care are poised to surge in the comingdecade. Spending on Social Security will rise 67 percent, to $1.414trillion in 2023 from $848 billion this year, while spending onprograms including Medicare and Medicaid will almost double to$1.808 trillion in 2023, estimates from the Congressional BudgetOffice released in May show.

Bonds in Europe's most indebted nations are recovering from theregion's sovereign debt crisis, with 10-year yields from Greece toIreland sinking last week to the lowest since at least 2010.

The average yield to maturity on bonds from Greece, Ireland,Italy, Portugal, and Spain fell to an average 2.44 percent on March5, the lowest in the history of the euro area, according to Bank ofAmerica Merrill Lynch indexes. That's down from more than 9.5percent in 2011, when the region was rocked by concern nations maystruggle to service their debt.

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.