Volatility in global stock markets is causing concern among investors as markets exhibit sharp fluctuations—from rapid growth to steady decline. According to a warning from the brokerage firm Jefferies, this instability may continue, with the situation in America cited as the cause.
In its new report, Jefferies warns that America's growing debt is a serious danger signal for global stock markets. Jefferies analyst Christopher Wood points out that the main risk is related to pressure on long-term Treasury bonds, and a rise of more than 5% in 10-year US Treasury bonds could destabilize markets in the future.
The financial condition of the United States of America is deteriorating: on August 18, US debt exceeded a level considered unthinkable just a few decades ago. US national debt reached approximately $40.05 trillion, which is 7.8% higher compared to the previous year. Furthermore, the federal government recorded a deficit of about $1.8 trillion in the first ten months of the current fiscal year.
Moreover, under Donald Trump's administration, the government registered a fiscal deficit of $432 billion in July alone, marking the highest monthly deficit since March 2021. This data on the growing debt burden attracts the attention of global investors, as the problem goes beyond a simple increase in debt size, including accelerating borrowing rates, the cost of servicing this debt, and increasing pressure on the US bond market, creating risks for the global stock market.
In July, federal revenues decreased by 1.3% compared to last year and fell by 5.7% over the last three months. Tax revenues, including tariffs, were down 8% in July and 6.4% over the three-month period. Conversely, government spending in America was rising: total federal expenditure increased by 21.7% in July compared to the previous year and by 10.7% over the last three months.
Significant changes are observed in the US bond market: the yield on 10-year Treasury bonds reached 4.683%, the highest level in 19 years. Similarly, the 30-year bond auction reached 5.216%, the highest level since auctions after 2001.
These figures indicate that the situation in America affects not only the US but the entire world. This is because US government bonds are held by banks, pension funds, insurance companies, investment funds, and foreign governments worldwide. Consequently, the consequences of the continuous rise in US Treasury yields have a much broader impact than just on the finances of the American government itself.