Economist Mohamed A. El-Erian has warned that a growing mismatch between debt supply and investor demand is building risks in U.S. bond markets and investors may not be pricing that in, as fiscal pressures intensify.
“We do have a developing fundamental imbalance between the amount of issuance we’re gonna see and the amount of money available to buy that issuance,” El-Erian said in a CNBC interview on Thursday.
Rising Issuance Meets Weakening Demand
The Wharton professor pointed to persistent deficits of around 6–7% of GDP, heavy refinancing needs and increased corporate borrowing as key drivers of supply, while demand is showing signs of strain.
“On the demand side, the money from the Middle East isn’t going to be there in the quantity that has been,” he said.
The U.S.-Israeli war on Iran, which began on February 28, has killed thousands of people and effectively closed the critical Strait of Hormuz, through which a fifth of the world’s oil and liquefied natural gas transits, threatening the worst oil shock in history and roiling markets.
‘Doom loop’ Risk Emerges In Bond Markets
He warned …
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