Mark Coombs, CEO of asset management firm Ashmore Group, warned that countries like the UK—running fiscal deficits and reliant on financial markets for funding—are "certainly" at risk of facing another "Liz Truss moment."
"The issue the UK faces now is that we might be approaching such a moment again," he said, referring to the market turmoil triggered by former UK Prime Minister Liz Truss's policies in 2022. "When a country runs persistent deficits and depends on market financing, a loss of confidence can lead not only to asset repricing but also to buyers shunning certain bond maturities."
In September 2022, Truss's government introduced large-scale deficit-funded tax cuts as part of a broader policy package, causing UK bond yields to surge. The resulting market upheaval was so severe that she swiftly reversed most measures, fired her finance minister, and resigned after just 44 days in office.
"Once confidence is lost, real trouble emerges, and markets do experience shocks," said the British billionaire.
However, John Studzinski, Managing Director and Vice Chairman of PIMCO, disagreed. "I don’t think we’ll see another Liz Truss moment," he stated at the same forum. "If foreseen in advance, there wouldn’t be a dollar shock or similar turbulence."
"In the case of Liz Truss, I’d attribute one-third of it to her and two-thirds to Liability-Driven Investment (LDI)," he added, referencing the pension fund strategy that exacerbated the market collapse.
Coombs noted concerning signs during April’s tariff-driven selloff, suggesting markets are growing uneasy with rising global debt levels. "There was a period when the bond yield curve behaved unusually, reflecting risk-off sentiment," he said. "Longer-dated bonds saw weak demand, reacting differently than expected. This indicates a preference for short-term assets."
Last week, UK bonds tumbled after Chancellor Rachel Reeves abandoned plans to raise the basic income tax rate in the upcoming budget. Meanwhile, Japanese bonds fell further on Thursday as markets braced for Prime Minister Sanae Takaichi’s economic stimulus plan due Friday.
Global debt has surged to roughly $74 trillion as governments and corporations borrow heavily. This year alone, global bond issuance hit a record $5.95 trillion, with borrowers capitalizing on favorable conditions to fund everything from AI projects to resurgent M&A activity.
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