The U.S. national debt is approaching the point where bond traders see ‘mounting risk’ of a ‘vicious cycle,’ Moody’s top economist says

Mark Zandi, the top economist at Moody's, has warned that the U.S. national debt is nearing a critical point where bond traders perceive a growing risk of a "vicious cycle." Currently, the national debt stands at more than $40 trillion, representing a debt-to-GDP ratio of 126%. While the U.S. economy remains the largest in the world, Zandi argues that its scale makes the situation "far and away the most important one."

Zandi believes he is witnessing the initial signs of discomfort in the Treasury market, cautioning that global investors are demanding higher rates due to the mounting risk. The 10-year Treasury yield has surged by nearly a percentage point this year, the largest increase among major economies. The situation could potentially spiral out of control as higher rates increase interest payments and debt, further driving rates up.