Yardeni Research Note on U.S. Debt Outlook
Yardeni Research issued a note on Tuesday stating that, while it shares the concerns of high‑profile commentators warning of a looming U.S. debt crisis, the firm believes the reckoning is not yet at hand and that betting against equities on that premise has proved costly.
The note references JPMorgan chief executive Jamie Dimon’s warning of “a crack in the bond market” and Ray Dalio’s description of the government’s debt situation as “nearing the point of no return” and approaching a “death spiral.” Yardeni calls both men smart and influential but observes that anyone who has followed their consistently pessimistic outlook over the past few years has missed a huge rally in the stock market.
Yardeni adds, “We’ll worry about the government’s debt when the Bond Vigilantes do,” noting that the 10‑year Treasury yield remains between 4% and 5%, a range the firm labels the “old normal” and says is consistent with a healthy economy because it is below nominal GDP growth.
The firm acknowledges that the fiscal picture is deteriorating: total public debt surpassed $40 trillion in August, net interest outlays have climbed above $1 trillion—on par with defense spending—and the deficit is running near 6% of GDP, a level traditionally associated with recessions.
Nevertheless, Yardeni points to Treasury Secretary Scott Bessent’s willingness to act on rising yields and Federal Reserve Chair Kevin Warsh’s commitment to restoring price stability as reasons why yields should stay contained.
In summary, Yardeni argues that concerns of an imminent U.S. debt crisis are premature, emphasizing that current Treasury yields are within a historically normal band and that policy makers are prepared to intervene if yields rise sharply.