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Paris-based forecaster says governments’ debt interest bills are increasing pressure on public finances

Surging government bond yields are a “major concern” to countries’ public finances given the mounting share of spending being consumed by debt interest, the OECD said on Wednesday, as it urged nations to rein in expenditure. 

Stefano Scarpetta, OECD chief economist, said one of the reasons for rising government borrowing costs was concern about the sustainability of public finances, with the Paris-based forecaster warning of “increasingly pressing fiscal challenges” affecting many of its members. 

In its interim economic outlook, the OECD highlighted a growing number of fiscal interventions by governments aimed at curbing the cost of energy for consumers and businesses, but only half of the measures were being properly targeted, and this was adding to the pressures on public finances. 

The average 10-year benchmark bond yield of G7 countries has hit 4 per cent this year for the first time since 2008. The US war with Iran and ensuing surge in energy prices has fuelled a bond sell-off that reflects investor concerns about rising inflation.

The combination of higher borrowing costs and record bond issuance by governments across the rich world has propelled a rise in debt-servicing costs that is worrying policymakers.

“The increase in bond yields is a major concern,” Scarpetta said in an interview with the FT.

He added debt-to-GDP ratios had been increasing “like a staircase” since the financial crisis as successive shocks have hit the global economy. “The debt servicing cost will increase at a time when debt-to-GDP ratios are at very high levels.” 

In its interim economic outlook, the OECD said “stronger efforts” will be needed by governments to “contain and reallocate” spending, as well as improved public-sector efficiency, so as to ensure “longer-term debt sustainability” and allow policymakers to respond to future shocks. 

Across the OECD, debt interest costs topped $2tn, or 3 per cent of GDP, last year, and are expected to increase further. In France, the interest bill is expected to rise by a quarter this year, and it already exceeds defence spending in a string of countries.

Amid the high borrowing costs, countries are increasingly relying on short-term bonds, which typically carry lower yields compared to long-term debt.

The US is expected to issue as much as $1tn of short-term Treasury bills — borrowings which mature in 12 months or less — in the coming year, excluding money raised to pay off redeeming debt.

But this increases the sensitivity of debt costs to rising interest rates, as high market yields pass more quickly into the interest bill. 

One route out of the debt squeeze is higher growth. The OECD said AI-related investment and trade is currently helping global growth weather the Gulf oil shock better than expected. 

The organisation added that G20 economies will expand by 3.1 per cent this year, 0.1 percentage points more than it forecast in June. The expansion should continue at a similar pace of 3 per cent in 2027, it added. 

Rising GDP will be led by stronger than expected growth in the US, where the economy is set to expand by 2.2 per cent this year and 2.1 per cent in 2027, boosted by the data centre construction boom. 

The OECD said GDP growth in nations including China, South Korea and Japan is being propelled by technology exports, with the global economy also cushioned by robust oil inventories.

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However, many analysts warn of a rising toll on global output with Brent crude oil hovering near $100 a barrel and no end in sight to the hostilities between the US and Iran. 

Inflation in G20 countries is set to rise to 4.1 per cent in 2026, up from 3.4 per cent last year, according to OECD forecasts.

It predicts price growth of 3.6 per cent in 2027 — an increase of 0.5 percentage points compared with its prior forecast. 

More than half of G20 countries currently have inflation that is above their central banks’ target, the organisation added. 

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Europe’s best-funded fusion company pushes for local supply chain

A Google-backed German nuclear fusion start-up said it will invest in the local production of a crucial material for future power plants as it seeks to establish a European supply chain for an industry in which US companies have dominated fundraising.

Proxima Fusion will invest €140mn in Lower Saxony to manufacture superconducting tape used to make powerful magnets, a critical component in many fusion reactor designs. The German state has agreed to contribute €21mn of the initial investment.

The company said it was in the “final stages of discussions” with a potential partner for the facility but did not disclose the proposed ownership structure or the nature of the partnership. It aims to scale production of the technology over the next few years.

Only a handful of manufacturers in China and Japan currently produce the material, according to industry executives and suppliers.

Francesco Sciortino, Proxima’s co-founder and chief executive, said there was a need to ensure that “some of that supply chain is also in Europe”.

This was “just a matter of resilience”, he said, arguing that if fusion eventually becomes an important source of electricity, control over its supply chain could become an energy security issue.

Fusion seeks to recreate the reaction that powers the sun by fusing light atomic nuclei, rather than splitting heavy ones as in conventional nuclear power plants. A gramme of fusion fuel could theoretically release as much energy as about 57 barrels of oil, but no fusion reactor has yet demonstrated commercial power generation.

Proxima has raised €650mn, including public grants, since it was founded in 2023, making it Europe’s best-funded fusion company.

Its investment highlights efforts to build a European industrial base around fusion, as billions of dollars of private capital flow into the sector, with the largest fundraising rounds concentrated among US companies. According to PitchBook, American start-ups accounted for about 70 per cent of the global funding in the first eight months of 2026 with $2.1bn.

High-temperature superconducting tape is used to make magnets capable of generating powerful magnetic fields that confine plasma heated to more than 100mn degrees in which fusion reactions take place.

Several leading fusion developers have invested heavily in magnet technology, including US-based Commonwealth Fusion Systems, the industry’s best-funded company. But western fusion executives have told the FT they are concerned that reliance on Chinese materials for their critical reactor components could come under scrutiny as the industry develops.

Sciortino, however, said he was “totally fine” working with Chinese companies and that the investment was driven more by Proxima’s need for material that met the demanding specifications of the demonstration machine it plans to operate by 2031.

But some fusion researchers question whether the industry is investing too much in advances in magnet technology while other unresolved engineering challenges receive less attention.

Commercial fusion plants would also require materials capable of surviving intense heat and neutron bombardment, as well as systems to produce and process tritium, one of the fuels expected to be used by fusion reactors. These technologies have never been proven on a commercial scale, leaving some experts sceptical about the timeline for private companies to bring fusion power to the electricity grid.

One senior scientist at a European fusion research organisation said some companies were focusing too heavily on magnets relative to those challenges.

The scientist suggested one reason was that superconducting magnets had commercial applications outside fusion, giving companies a potential source of revenue even if fusion power took longer than expected to materialise.

“They want to sell magnets for other applications,” the scientist said, adding that companies could potentially “make billions” from the technology.

One fusion supplier said he was looking at magnetic levitation trains for the use of powerful superconducting magnets before the material is used on commercial fusion.

- The $14bn is Q2 segment revenue x4, but Pay-TV (64% of it) has been off EchoStar's books since the DBS Ch.11, Hughes is in Ch.11 since 3 Aug, and Boost is about breakeven. Segment OIBDA is about $3bn a year and falling.

- SpaceX: 261.8m SPCX shares = ~$40bn at $151.85, vs ECHO mkt cap ~$27bn. That's ~0.9 SPCX per ECHO share, or ~$137 of SpaceX per share vs ~$92.

- Why the discount: shares only arrive at final closing (target 30 Nov 2027), stake not hedged, tax bill on the gain, Hughes lenders contesting dealings with the parent, buyback capped by bond covenants.

- Owning ECHO = owning SpaceX 14 months forward at a discount, with Pay-TV run-off and Ch.11 noise attached.