While Japan's initial 2026 budget appears disciplined, the true test of its fiscal policy will be the supplementary budget, likely coming in the autumn. Historically, these massive supplementary budgets—not the initial plans—have been the primary source of fiscal deterioration and market concern in Japan.
While overall net government bond issuance is forecast to drop 13%, this is solely due to the U.S. When measured by duration (10-year Treasury equivalents), gross supply is actually projected to increase by 1% year-over-year. This presents a more challenging picture for markets than the headline number suggests.
In response to shifting investor demand and steeper yield curves, Euro area sovereigns have aggressively reduced the weighted average maturity (WAM) of their debt issuance. The average issuance WAM has fallen from a peak of 13 years during the COVID era to a projected 10 years in 2026, reflecting a major strategic shift.
Despite Germany's fiscal expansion driving record Euro area gross issuance, the resulting €60 billion increase in German bonds is considered insignificant for a triple-A issuer. Analysts argue this amount is easily digestible and does not warrant concerns about rising term premium, especially when compared to the scale of U.S. Treasury issuance.
Despite the Federal Reserve's plan to purchase $490 billion in T-bills in 2026, easing immediate funding pressure, the U.S. Treasury is expected to increase coupon auction sizes in November. This preemptive move aims to mitigate the long-term risks associated with a rising T-bill share of debt, such as financing cost volatility.
Unlike other developed markets facing fiscal pressures, Australia is experiencing a multi-year fiscal upgrade cycle driven by strong tax revenues from inflation and commodity exports. This resulted in its net debt position being 11% of GDP lower than projected three years ago, leading to reduced issuance targets and a uniquely positive outlook.