Investors are warning governments to expect much higher borrowing costs over the coming years, in a shift that will pinch public finances and constrain states’ ability to respond to crises.

Despite a recent rally, government bond prices have dropped hard on both sides of the Atlantic this year, in part reflecting a growing acceptance that interest rates will need to stay high for the long haul to dampen inflation. In addition, investors are struggling to digest governments’ much bigger debt issuance plans without central banks stepping in to hoover up supply.

The result is much higher bond yields that tie governments in to large regular interest payments when they take on fresh debt. In 2018, the interest bill for G7 countries stood at $905bn a year, according to credit rating agency S&P. By 2026 it will be $1.5tn.