Bond Vigilantes Return: Citadel’s Griffin Warns of US Debt Crisis Amid Japan Scare

The specter of a sovereign debt crisis has moved from theoretical debate to immediate market concern at the World Economic Forum in Davos. Following a sudden crash and rebound in Japanese Government Bonds (JGBs), top financial heavyweights are warning that the US Treasury market could be the next target for 'bond vigilantes.'

The “Liz Truss” Warning

Ken Griffin, CEO of market-maker Citadel, issued a stark warning on Wednesday, describing the chaos in Japan as a 'light version of a Liz Truss moment'—referring to the UK's 2022 gilt market meltdown caused by unfunded tax cuts. Griffin cautioned that fiscal discipline is eroding globally, and while the US has the resources to service its debt, the sheer scale of borrowing is creating a false sense of security.

“The bond market vigilantes are back,” Griffin noted. “The real question is: when will they strike in the US?”

US Fiscal Dominance Under Fire

The focus on debt sustainability comes as the US debt-to-GDP ratio marches toward 130%. Gita Gopinath, a former IMF official, highlighted that the 'safety halo' traditionally surrounding US Treasuries is fading. With yields on the long end of the curve holding above 4%, markets are beginning to price in the structural reality of massive deficits.

While US Treasury Secretary nominee Scott Bessent argued in Davos that the US can “grow its way out” of the debt mountain—citing Trump's projection of 5.4% GDP growth—institutional investors remain skeptical.

Data Snapshot & Technicals

• Currency Pressure: USD/JPY remains the epicenter, trading near 158.15 as Japan's fiscal woes battle against US yield pressures.
• Yield Watch: Yields on the long end of the US curve are holding firmly above 4%.
• Macro Forecast: Trump's team projects 5.4% GDP growth while the debt-to-GDP ratio tracks toward 130%.