Soaring U.S. debt doesn’t just put America at risk. It could trigger contagion across global markets, IIF warns
From Yahoo Finance.: 2025-05-31 15:51:00
Treasury yields surged as U.S. debt fears grow with a budget bill expected to add trillions to the deficit, impacting global economies. Rising borrowing costs and weak investor demand signal potential contagion in bond markets. High debt levels could trigger significant spillover effects worldwide. Foreign investors show reluctance to finance U.S. deficits.
Deutsche Bank warns of a buyer’s strike among foreign investors, exacerbating U.S. debt concerns. Sovereign yields in key economies move together, reflecting deep interconnections. Japan and major emerging markets show yield sensitivity, impacting global rates. Recent volatility in JGB yields influences U.S. Treasury rates. Rising Japanese asset yields attract local investors, potentially diverting U.S. investment.
Despite U.S. Treasury market size and liquidity, rising debt levels impact emerging markets. Shrinking international capital pool affects sovereign EM borrowers. U.S. and Euro Area dominate global cross-border debt portfolios. Emerging markets account for a small fraction, showing increased sensitivity to U.S. debt levels. Global bond markets face contagion risks from rising U.S. debt levels.