Top financial experts and former government officials are raising alarms about a potential crisis in the U.S. Treasury debt auction process.
The Treasury regularly sells debt securities—bills, notes, and bonds—to fund government deficits. But experts fear a future auction might fail to attract enough buyers, triggering a sharp rise in borrowing costs for all Americans.
Gary Cohn, former Trump White House adviser and Goldman Sachs president, warned that a failed Treasury auction would cause extreme market volatility. He said the U.S. debt market is the strongest in the world—until it suddenly is not.
If foreign and domestic investors lose interest, interest rates could spike dramatically within just a few auctions, making government financing difficult and pushing the economy into a new, higher interest-rate environment.
JPMorgan CEO Jamie Dimon echoed these concerns, predicting a “crack in the bond market” is inevitable. Steven Mnuchin, Treasury Secretary under Trump, added that without economic growth, large deficits will create serious economic problems and eventually trouble the bond market.
Former House Speaker Paul Ryan highlighted the crucial role of “primary dealers”—major financial institutions that buy large shares of Treasury auctions. He described a scenario where these dealers might be forced to buy half the auction to prevent failure, a sign that the market is in deep trouble.
In response, the House Financial Services Committee is reviewing the resilience of Treasury auctions and the roles of the Federal Reserve and private sector in maintaining market stability. Congressman Frank Lucas is leading a task force to recommend ways Congress can strengthen the auction process.
Adding to concerns, a major tax and spending bill moving through Congress could increase the federal deficit by $3 to $4 trillion over the next decade. This would require the Treasury to issue significantly more debt, raising the stakes for auction stability.
U.S. Treasury auctions work by accepting non-competitive bids—where investors agree to the auction-set yield—and competitive bids—where investors specify the yield they want.
The Treasury fills bids starting with the lowest yields until the offering amount is met. If demand falls, yields rise, increasing borrowing costs for the government and, ultimately, consumers.
The warnings from financial leaders underline the fragile balance in the U.S. debt market and the risks of a sudden loss of confidence that could disrupt borrowing costs and the broader economy.
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