The narrative that rising public debt levels bring higher interest rates, as well as risks of economic and financial disruptions, is a foundation of classical economics.
However, the experience of Japan and other developed markets suggest an alternate set of outcomes altogether. In recent decades, DM countries have generally operated outside the classical paradigm with high public debt levels bringing lower 10-year government yields.
Even when accounting for real GDP growth, inflation, and growth of the working-age population, high debt levels appear to weigh on DM bond yields.
In contrast to DMs, the data suggest a mildly positive relationship between debt levels and interest rates for emerging market economies, which could introduce an additional source of variation in EM debt relative to DM debt.