Henry Paulson sounds alarm on potential Treasury market shock

Former U.S. Treasury Secretary Henry Paulson warns of potential instability in the Treasury market due to rising federal debt and financing needs. He emphasizes the necessity for contingency plans to address a sudden drop in demand for U.S. Treasuries, which could lead to severe financial disruptions. Paulson highlights the risk of a feedback loop where increased borrowing costs exacerbate budget deficits. He suggests that in a worst-case scenario, the Federal Reserve may need to step in as a primary buyer of government debt, potentially lowering bond prices and raising interest rates. Current Treasury yields range from 3.78% to 4.94%.