Debt apocalypse: USA heading for financial catastrophe!

Debt apocalypse: USA heading for financial catastrophe!

The US's economic challenges have reached alarming levels. According to reports from Focus The difficulties in raising money are proving to be more serious than the problems that Greece had in the past. The US stock market, dollar exchange rate and bond trading are simultaneously experiencing weak performances, leading to increasing uncertainty in financial markets.

On May 21, the US Treasury Department held an auction for $16 billion in 20-year Treasury bonds. This auction was met with weak demand as the bonds could only be sold with an interest rate promise of almost 5%. This represents the highest interest rate on bonds in the current millennium.

Rises in Yields and Government Debt

The yield on 30-year US government bonds has exceeded the 5% mark for the first time, while ten-year government bonds are at 4.4%. In comparison, Greek ten-year government bonds are valued at just 3.3%. A key reason for the rise in yields is the downgrade of the US credit rating by Moody's, which lowered the rating from Aaa to Aa1. This downgrade is due to the high national debt, which is now close to $31 trillion, or even close to $37 trillion in some reports, with experts pointing to the possibility of a further increase of up to $5 trillion through a new debt package under Donald Trump.

Analysts of the financial market world warn that rising market interest rates will make loans more expensive for consumers and companies and could therefore weigh on economic growth. Because of their returns, bonds appear to be a more attractive alternative to stocks. Confidence in the US government and its policy course is being undermined by the signaling effect of the bond market, especially after the downgrade by Moody's.

Market developments and international reactions

International interest in investing in Europe, especially in Germany, is growing. In May, 50% of ETF inflows went to European equity strategies, while US dollar strategies only received 900 million euros. Investors are showing increasing distrust of the US as a safe haven for investments, reinforcing the downward trend in US stocks. As an immediate result, the S&P 500 index fell 1.6% and the Nasdaq fell 1.34%.

These developments are in the context of US tariff policy and uncertainties that prevail in the financial markets. The Federal Reserve is trying to stabilize markets by buying government bonds, but challenges remain. In a global environment where alternatives to US bonds are limited, gold remains in demand, while German and European bonds may appear more stable.

In summary, the future development of US yields will depend critically on the government's fiscal decisions and the confidence of global investors. Continued high inflation rates could cause yields to continue rising and potentially reach new highs.