Following the Great Financial Crisis (GFC) and the Covid-19 pandemic, public debt has risen to near post-World War II highs in many economies. And it might climb higher, with current fiscal deficits still large and high fiscal pressures coming from ageing populations and public investment needs. Alongside this debt surge, the structure of sovereign bond markets has changed markedly. Hedge funds are playing an increasing role in intermediating government debt, often through highly leveraged and funding-dependent strategies that hinge on both banks and other non-bank financial institutions (NBFIs). These shifts have created a new fiscal-financial stability nexus […]