BREAKING: Former U.S. Treasury Secretary Henry Paulson, who steered the nation through the 2008 financial crisis, has issued a stark warning that the bond market faces a potential 10% correction. In a dire assessment, Paulson specifically used the term 'vicious' to describe the coming downturn, suggesting a prolonged and severe contraction. The U.S. bond market, considered the bedrock of global finance and the 'safest investment on earth' due to U.S. government backing, is flashing red. A sharp move in the benchmark 10-year Treasury yield would send shockwaves through global mortgages, corporate borrowing costs, and sovereign debt markets.

Bond Market’s Crash Will Be the Hardest, Says Former Treasury Secretary

If the Treasury market faces pressure, the ripple effect will hit the broader markets, including stocks and commodities. Not to mention, the real estate sector will turn shaky, and the loop of financial discomfort extends. When the US government needs money for operations, from defense spending to social programs, it doesn’t depend on taxes alone. This gap, called the budget deficit, is financed by issuing Treasury securities, which are sold in the bond market.

While the National debt races towards $39 trillion, the US bond market is carrying more weight than it can handle. Paulson warned that the weight is only getting heavier until the Treasury market snaps.Paulson said in a recent interview on Bloomberg Television’s Wall Street Week.

When the crash occurs and the US government does not find buyers to fund its debt, the pressure falls on the Federal Reserve to become a purchaser. Paulson stressed that the situation will become aas prices and interest rates will rise rapidly.