The 9th webinar of the Public Debt Management (PDM) Network examined how shifts in the investor base for sovereign debt are reshaping funding conditions, market liquidity and risk management. Against a backdrop of higher debt levels and quantitative tightening, the discussion highlighted why investor composition has become a strategic issue for public debt managers. The session combined analytical evidence from the OECD, a country case study from Canada and perspectives from emerging and developing economies. Speakers included Sam Foxall (OECD), Jeffrey Gao (Bank of Canada) and Rodrigo Cabral (World Bank).

Sam Foxall discussed key findings from chapter 3 of the OECD Global Debt Report 2026, focusing on structural shifts in sovereign bond holders across advanced economies. He highlighted the transition of central banks from dominant buyers during the period of quantitative easing to net sellers since 2022, which has increased the volume of bonds that markets must absorb. This shift has been accompanied by a larger role for more price‑sensitive investors, including foreign investors, investment funds and money market funds, alongside a declining structural demand for duration from pension funds and a growing presence of hedge funds. While these changes raise concerns about sensitivity to shocks, the analysis also showed that higher free float and trading volumes have generally supported market liquidity, and that issuers value diversity in their investor base.

Jeffrey Gao presented the Canadian case, illustrating how these global trends are playing out in practice. He explained how rising issuance and quantitative tightening have led to a rapid increase in free float, with hedge funds emerging as important marginal buyers in auctions. While hedge fund participation has supported demand and liquidity, their reliance on leverage and shorter investment horizons may increase the risk of abrupt exits during periods of market stress. Gao outlined policy responses adopted in Canada to mitigate concentration and resilience risks, including adjustments to the debt distribution framework, measures to broaden participation by domestic and foreign investors, expanded non‑competitive bidding options, enhanced investor relations, and tools to address bond scarcity such as limited reopenings and central bank securities lending.

Rodrigo Cabral provided a perspective from emerging and developing economies, where investor bases are often more concentrated and dominated by domestic banks. He emphasized that diversification is constrained by broader structural factors, including market infrastructure, macroeconomic stability and the depth of long‑term savings, many of which lie beyond the direct control of debt managers. Nevertheless, he highlighted actions within the DMO’s remit, such as strengthening transparency and predictability in primary markets, supporting benchmark issuance, avoiding short‑term trade‑offs that undermine market development, and investing in effective investor relations. He also referred to ongoing World Bank analytical and capacity‑building work supporting countries in this area.

Q&A Highlights

The discussion addressed how debt managers assess investor behaviour under stress, manage liquidity risks linked to repo market conditions, and interpret heterogeneity within investor groups, particularly hedge funds. Participants also discussed the implications of geopolitical risk for foreign demand, the growing importance of data‑driven investor base analysis for monitoring market functioning and the benefits of adopting dedicated products and programmes to target retail investors directly.

Key takeaways

The webinar highlighted that investor base composition has become a central strategic issue for public debt management. As central banks normalize balance sheets and market absorption increasingly relies on more price‑sensitive investors, debt managers face new challenges in balancing cost, risk and market resilience. Diversifying the investor base, maintaining active investor relations and closely monitoring market functioning were identified as key elements of an effective debt management strategy.