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US on brink of debt crisis?

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Analysts are sounding the alarm once again! Could the US be drifting toward a sovereign debt crisis? It is a real possibility.

Concerns have escalated following Moody’s downgrade of the US government’s credit rating. At the same time, global markets have seen a spike in Japanese bond yields, and the S&P 500 index tumbled 1.61%. As for the size of America’s national debt, it now stands at a record-breaking $36.2 trillion, with $28.6 trillion in outstanding securities.

According to analysts, long-term Treasury yields are climbing. For the first time since October 2023, 30-year bond yields surpassed 5.00%, raising serious concerns among financial observers.

Part of this anxiety stems not just from President Donald Trump’s tariff strategy, but also from his sweeping fiscal plan. The Congressional Budget Office estimates that the proposal could cost $2.3 trillion over the next decade. The Committee for a Responsible Federal Budget agrees but warns the price tag could balloon to $5.7 trillion if temporary tax cuts are extended.

This kind of fiscal expansion, especially when paired with aggressive tariffs, may fuel inflation in the US. Still, some analysts are hopeful the situation could be stabilized. Market watchers are now wondering whether bond vigilantes will push 10-year yields above the critical 5.00% mark, a move that could signal deeper structural troubles.

In this context, the question of a looming debt crisis is pressing. Experts agree it is a real possibility, particularly as tariffs add fuel to inflationary pressures.

However, a debt crisis does not necessarily spell disaster. Analysts at Yardeni Research suggest that if the situation prompts Washington to adopt a more stable and sustainable fiscal approach, the turbulence could eventually subside. For investors, such a moment could even represent a long-term opportunity to buy into the equity market.

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