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Moody's economist Mark Zandi flags rising US crisis risk
Zandi points to a bond market sell-off that has pushed 30-year Treasury yields higher and has led the Treasury to begin additional buybacks early next month.
Moody's Analytics chief economist Mark Zandi warned that conditions for a US economic crisis are increasingly coming together, describing the current setup as something the country may “sleepwalk” into, according to an interview on the Sonia and Simon podcast covered by Yahoo Finance.
Zandi said he cannot pinpoint when a “day of reckoning” could arrive, but argued that key preconditions are already forming. He said he expects the US may be forced to address deteriorating fiscal conditions without an external shock, while also warning that higher interest rates could generate the kind of crisis that pushes political change.
He cited recent turmoil in bond markets, noting that a sell-off over the past month has pushed yields on the 30-year Treasury sharply higher. Yahoo Finance reports that the Treasury Department is planning to buy back more of its bonds starting early September to help suppress interest rates artificially.
Zandi also highlighted that the US debt-to-GDP ratio crossed 100% at the end of April, a level the US has not reached since the aftermath of World War II. Yahoo Finance said he tied that deterioration to the size of current deficits and what the government takes in versus what it spends, with the article beginning to reference the scale of the deficit as part of the concern.