IMF Warns Sovereign Bond Yields Could Rise in a 'Disorderly Fashion' as It Puts US Growth at 2.3% and Oil at $96

The International Monetary Fund published its World Economic Outlook and Global Financial Stability Report on 13 October at its annual meetings in Bangkok. It forecast US growth of 2.3% in both 2026 and 2027, and global growth of 3.1% this year, a little higher than in July. Global inflation is forecast at 4.7% in 2026, easing to 4.1% next year.

The stability report carries the sharper warning. It says inflation, government debt and heavy borrowing by AI companies are straining sovereign bond markets, and that “sovereign bond yields could rise in a disorderly fashion.” The “impact could be severe given the foundational importance of sovereign bond markets,” it says. An IMF deputy director, Athanasios Vamvakidis, said: “The market is concerned about absorption potential of the huge issuance.”

Oil and the war

The IMF expects oil prices to rise nearly 41% this year, averaging $96 a barrel. Its forecast assumes oil and gas shipments through the Strait of Hormuz resume by March. Brent crude settled at about $105.69 on 13 October.

The IMF also found growth increasingly concentrated: 32 countries account for 95% of global growth, down from 54 in April. Managing Director Kristalina Georgieva described AI’s effect on jobs as “a slow moving tsunami,” affecting “around 40%” of jobs.

The US absence

The US holds the G20 presidency this year, and Treasury Secretary Scott Bessent was expected to chair the G20 finance meeting in Bangkok. He stayed home, sending his deputy, as covered in our earlier post.

Why it matters for Washington

The US Treasury market is the largest sovereign bond market and the one the IMF’s warning is mostly about. The 10-year yield has been above 5% for weeks. Federal Reserve Governor Christopher Waller said on the same day that US debt has lost some safe-haven status. CBO projects debt held by the public at 120% of GDP by 2036. Treasury’s next quarterly refunding announcement, in early November, will show how much it plans to borrow and in what form, and whether it shifts toward shorter debt to avoid locking in high long-term rates.

An IMF warning doesn’t move policy on its own. But the institution’s fiscal report, usually published the same week, gives detailed figures on US deficits that Congress’s budget hawks and Senator Elizabeth Warren, who is pressing Bessent on yields, are likely to cite.