Global Shift: Countries Issue Fewer Dollar Bonds as Confidence in U.S. Wanes

Governments across Asia, Europe, and even parts of the Americas are borrowing less in U.S. dollars this year, instead choosing to raise funds through their own local currencies or other alternatives. The shift marks a major change in global debt trends, driven by concerns over rising interest rates in the U.S., unpredictable currency swings, and growing worries about the long-term financial health of the American government.

Dollar Bond Sales Drop Globally

According to financial data platform Dealogic, the total amount of U.S. dollar bonds issued by non-U.S. governments has fallen by 19% in the first five months of 2025. From January to May, only $86.2 billion in such bonds were issued, compared to the same period last year. This marks the first time in three years that dollar bond sales have dropped.

Major Declines by Key Economies

Several countries have pulled back sharply on issuing debt in dollars:

Canada: Dollar bond sales fell by 31% to $10.9 billion.

Saudi Arabia: Issuance dropped 29%, down to $11.9 billion.

Poland: Sales declined 31%, totaling $5.4 billion.

Israel: Cut dollar bond issuance by 37%, raising only $4.9 billion.

Brazil: Saw a major 44% drop, issuing just $2.4 billion.

The Move Toward Local and Alternative Currencies

As borrowing costs rise in the U.S. and the dollar experiences more volatility, many nations are opting to issue bonds in their own currencies or explore new options.

India, Brazil, and Saudi Arabia are among the countries making a clear shift toward local markets or non-dollar currencies.

Saudi Arabia is expanding its borrowing options. It recently issued €2.25 billion ($2.36 billion) in euro bonds, including its first green bonds, to reduce its dependence on borrowing in U.S. dollars.

Brazil is considering a historic move — issuing government bonds in Chinese yuan. This comes after President Lula da Silva’s recent visit to Beijing, which resulted in new investment deals and a currency swap arrangement between the two nations.

Local Bond Markets Hit a 5-Year High

This global trend has led to a surge in local currency bond issuance. According to Dealogic, governments worldwide have raised $326 billion in local currency bonds so far in 2025 — the highest level in five years.

This suggests that more countries are relying on domestic financial systems for funding, reducing exposure to global currency and interest rate fluctuations.

Indian Bond Yields Fall as Nation Prepares for Larger Rate Cuts, Diverging from US Trends: Citigroup

Indian government bond yields are declining as the country signals plans for significant interest rate reductions, moving in a different direction than the United States. While U.S. yields have been rising due to inflation concerns, India’s 10-year bond yields have fallen by more than 30 basis points since April, narrowing the difference between the two to the lowest level seen in 20 years.

India’s 10-Year Bond Yields Hit 3-Year Low, May Spur Investors to Shift Toward Stocks

India’s 10-year government bond yields have dropped to their lowest point in three years, reducing borrowing costs for businesses. Experts believe this decline may encourage more investors to shift from bonds to stocks. Despite the fall in bond yields in 2024, stock markets have not yet shown a significant response.

Why This Shift Matters

There are a few key reasons behind this shift:

1. Rising U.S. Interest Rates: Borrowing in dollars has become more expensive due to rate hikes by the U.S. Federal Reserve.

2. Currency Risk: The dollar’s recent volatility has made it a less stable option for long-term debt.

3. U.S. Fiscal Concerns: Increasing debt levels and political gridlock in Washington have caused some countries to rethink their reliance on the U.S. financial system.

4. Geopolitical Realignment: Countries like Brazil and Saudi Arabia are strengthening financial ties with China and other global powers, reducing dependence on the West.

Looking Ahead

If this trend continues, we may see a significant long-term shift in how countries finance their budgets. Local and regional debt markets could become more important, and the role of the U.S. dollar as the world’s dominant reserve currency may slowly decline.

This global debt reshuffling also signals deeper changes in the balance of financial power — and how nations are preparing for a more multipolar economic world.