The potential for a “Liz Truss” style crisis in the United States is not currently a concern, even as the nation’s government deficit continues to grow significantly, according to Libby Cantrill, the head of US policy at Pimco, a prominent global bond fund.

Cantrill indicated that investors are maintaining confidence in US government bonds despite expectations that the national debt is projected to reach historic levels surpassing 106 percent of the GDP.

“We do not foresee a scenario akin to the Liz Truss moment impacting the US Treasuries market,” Cantrill explained to The Times, referencing the steep rise in long-term debt yields and the pound’s sharp decline triggered by Truss’s mini-budget in September 2022.

She emphasized that the US dollar serves as the reserve currency, with Treasury securities considered a reserve asset, creating a consistent demand for American financial instruments—an advantage not available to other nations.

Recent data from the Congressional Budget Office highlighted that the federal deficit is estimated to exceed $1.8 trillion in 2024, which translates to around 6.4 percent of GDP, while the national debt is on a trajectory toward exceeding 100 percent of GDP.

Cantrill pointed out that neither major political party has prioritized fiscal consolidation or reducing the deficit within their economic agendas, a situation that may lead to increased yields on longer-term bonds to compensate investors amid rising deficits.

She added, “While we are cautious regarding the fiscal hurdles ahead, we do not anticipate a widespread sell-off across the yield curve. As long as the status quo remains, Washington is likely to continue its current course.”

Warnings have emerged from analysts about the potential resurgence of “bond vigilantes” in advanced economies, where bondholders may reject government debt in response to lenient fiscal strategies. Observers have also highlighted the risk of a “buyers’ strike” in the UK, should the Labour government decide to implement substantial spending after easing fiscal restrictions in the forthcoming budget.

Fitch Ratings has revised its outlook on French government bonds, cautioning that the second-largest economy in the European Union is heading towards a debt accumulation of 118.5 percent of GDP by 2028. France’s deficit is anticipated to reach 7 percent of GDP, among the highest in the EU, prompting the government to unveil €50 billion in austerity measures to reduce the deficit to 5 percent of GDP next year.

Despite experiencing pressure from bond markets, the US has been largely insulated from such challenges, even after losing its triple-A rating from Fitch last year. Cantrill noted that further downgrades from Moody’s, the sole major agency still bestowing the US with the highest credit rating, could draw significant attention and cause fluctuations in the market.

One key fiscal challenge looming for the US is the expiration of numerous corporate tax cuts enacted during the Trump administration, set to end next year. These cuts represent an estimated cost of $4 trillion over the next ten years.

According to Cantrill, “We anticipate persistently high deficits primarily because neither party is likely to pursue revenue increases. Additionally, long-term challenges will stem from costs associated with entitlement programs, including Social Security and healthcare.”