BlackRock Warns Record US Debt Threatens Treasuries, Spurs Shift Abroad

BlackRock said surging U.S. government borrowing—now exceeding $36 trillion—has become the single greatest threat to the nation’s standing in global markets. In a third-quarter fixed-income outlook released Monday, the world’s largest asset manager warned that unchecked deficits risk undermining demand for long-dated Treasuries and the dollar, strengthening the case for investors to diversify into European bonds and other non-U.S. assets.

The report argues that record issuance, combined with reduced purchases by the Federal Reserve and foreign central banks, could leave private buyers absorbing “more than half a trillion dollars of debt weekly,” pushing borrowing costs higher. BlackRock recommends trimming exposure to the long end of the Treasury curve, holding more short-dated bills and increasing allocations overseas.

Rick Rieder, the firm’s chief investment officer for global fixed income, reinforced the message in interviews, saying he currently favors equities over long-duration bonds and sees a “generational opportunity” in today’s income yields. Rieder expects the Fed to cut interest rates twice later this year and contends that markets have yet to fully price the long-term economic impact of artificial intelligence, advising investors to sell volatility.

BlackRock noted that a tax-and-spending package under debate in Congress could add about $5 trillion to federal debt over the next decade, accelerating fiscal pressures. While the firm considers widespread de-dollarization unlikely, it cautioned that persistent deficit growth could erode the United States’ “special status” in global finance if left unaddressed.