Rising government debt is sparking market concern across major economies, with the U.S., Japan, and the U.K. under increased investor scrutiny. Moody’s recent downgrade of the U.S.'s last AAA rating and weak demand in Japanese bond auctions highlight mounting fiscal risks.
The U.S. is facing pressure after April’s bond selloff and a proposed $3.3 trillion debt increase from President Trump’s tax and spending bill. While the U.S. dollar’s reserve status offers some buffer, JPMorgan CEO Jamie Dimon warned of cracks in the bond market. Authorities are expected to cap 10-year Treasury yields near 4.5%, with regulatory changes possibly boosting bank participation in Treasury markets.
Japan, long seen as resilient despite a massive debt load over 200% of GDP, is seeing that narrative shift. Yields on long-term bonds surged following the worst 20-year auction in over a decade. The Bank of Japan’s reduced bond buying and declining interest from pension funds are key concerns. Prime Minister Shigeru Ishiba’s push for spending and tax cuts adds to fiscal pressure.
The U.K., with debt near 100% of GDP, remains exposed to global selloffs. Finance Minister Rachel Reeves is set to unveil a multi-year spending plan amid rising borrowing costs. The IMF urges fiscal discipline, and analysts suggest ending Bank of England bond sales could support the market.
France has seen a drop in its bond risk premium, but long-term debt worries persist. A deficit-reduction roadmap due in July may face political resistance. Meanwhile, Italy has improved its credit standing with a sharply reduced budget deficit, boosting investor confidence. The Italy-Germany bond yield gap is near its narrowest in years, signaling relative stability.
These developments underline rising global debt risks and shifting market sentiment.


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