Treasury Auction Failure Could Trigger Rate Spike, Warn Top Financial Leaders

Top financial leaders warned Friday that the U.S. could face a failed Treasury debt auction, triggering a spike in borrowing costs and a higher-rate economic environment, according to Axios. Former Goldman Sachs president and Trump White House advisor Gary Cohn said waning interest from domestic and foreign buyers could cause U.S. financing to break down “within one or two auctions.” JPMorgan CEO Jamie Dimon warned that a disruption in the bond market is inevitable, stating, "It is going to happen." Former Treasury Secretary Steven Mnuchin warned that persistent deficits without economic growth will eventually lead to serious problems in the bond market. The tax and spending cuts bill advancing through Congress is projected to raise fiscal deficits by $3 trillion to $4 trillion over the next decade. The government would need to increase Treasury bond auctions to cover the gap.