Three big trends:

1. Government debt around the world has ballooned. Global government debt will pass 100% of global GDP within the next couple of years, nearly double the share in 2000. That could present a problem in a new era of structurally higher interest expenses.
2. Term premia are back. A surge in debt issuance, a pullback in asset purchases by central banks, persistent concerns about inflation and a slower glide path on rate cuts have created a floor under bond yields. The wedge between short- and long-term bond yields has widened as investors seek compensation for the risk of lending over longer time horizons.
3. Defaults are not impossible. History is littered with government debt defaults. Rescue packages and austerity are usually called upon to right the ship; these can cause economic and social harm for decades. […]