Ex-Treasury chief warns of US bond crash and calls for contingency planning

Henry Paulson urges emergency readiness as debt risks grow

Former U.S. Treasury Secretary Henry Paulson warned that U.S. authorities should prepare a contingency plan for a possible collapse in demand for U.S. Treasurys, saying the impact would be severe. He stressed the need for a short-term “break-the-glass” emergency plan ready to deploy when market stress intensifies.

The U.S. Treasury market underpins the global financial system and serves as the benchmark for pricing corporate bonds, mortgages and equities. Economists have warned of a potential “doom loop” as national debt surpasses $39 trillion, pushing investors to demand higher yields. Interest payments on 10-year notes currently stand near 4.3%, increasing fiscal pressure. If borrowing costs rise further, the Federal Reserve could become the principal buyer of government debt.

Treasury stress could create mixed outlook for crypto markets

A crisis in the $31 trillion Treasury market could drive investors toward alternatives like Bitcoin, especially if inflation fears weaken confidence in the dollar. However, risks remain because Tether holds about 63% of reserves in Treasury bills and 10% in reverse repurchase agreements.

Research lead Andri Fauzan Adziima from Bitrue said such an event could trigger short term liquidity stress. Meanwhile, the U.S. Department of the Treasury conducted its largest buyback, accepting $15 billion in securities maturing between 2026 and 2028 to improve liquidity.

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