In mid-2025, JPMorgan Chase CEO Jamie Dimon warned of an upcoming "crack" in the bond market due to increasing US debt, noting, "I just don't know if it's going to be a crisis in six months or six years." This analysis will explore the likelihood of such a crack, based on the current global debt outlook in Western Economies, as well as expectations for the near future. Beginning with the broader macroeconomic picture at the start of 2026, and the basic forecasts from the International Monetary Fund.

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Global Macroeconomic Outlook: Growth, Deficit, and Debt Forecasts According to the IMF

The following table illustrates global debt-to-GDP ratios, deficits, and GDP growth for some of the most significant countries worldwide.

Table: Global Debt, Deficit, and GDP Growth

Country	Debt-to-GDP 2025	Deficit 2025	Real GDP Growth 2026
USA	128.7%	-6.5%	2.1%
Germany	66.0%	-3.0%	0.9%
France	119.6%	-5.5%	0.9%
Italy	138.3%	-3.3%	0.8%
Spain	98.7%	-2.7%	2.0%
United Kingdom	104.8%	-4.4%	1.3%
Switzerland	36.1%	(N/A)	1.3%
China	102.3%	-8.6%	4.2%
India	80.8%	-6.9%	6.2%
Japan	226.8%	-2.9%	0.6%
Canada	113.0%	-1.9%	1.5%
Australia	50.7%	(N/A)	2.1%
Brazil	95.0%	-8.5%	1.9%

Source: IMF, October 2025

Notes:

• Japan has the largest debt-to-GDP ratio (226.8%); however, 90% of this debt is held domestically by internal investors, with only 10% held by foreign creditors
• The US debt-to-GDP ratio is growing (128.7%) alongside a significant deficit (-6.5%)
• In the Eurozone, Germany (66.0%) appears to be in a much better position than Italy (138.3%) and France (119.6%)

The IMF Forecast for 2030

In October 2025, the IMF forecasted that the debt-to-GDP ratio of advanced economies would rise from 110% in 2025 to 119% in 2030.

• U.S. public debt is expected to reach 143% in 2030
• In the euro area, the debt-to-GDP ratio is expected to rise from 87% in 2024 to 92% in 2030
• In emerging markets and developing economies, the debt-to-GDP ratio is expected to rise from 70% in 2024 to 82% in 2030

As the United States is the largest and most influential economy worldwide, it is useful to investigate how and when US debt grew to become a problem.

 

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US Debt-to-GDP: A Historical Perspective (1790-2025)

The chart below illustrates the historical US public debt-to-nominal GDP ratio for the period 1790-2025. Alongside the debt-to-GDP line (black), labels explain each major spike, and a 30-year average is shown (orange line).

Data Source:

• Treasury.gov (US Public Debt)
• Measuringworth.com (US Nominal GDP)

Chart: US public debt to nominal GDP (1790-2025)

Historically, the US debt-to-GDP ratio increased during three major wars: the Civil War, World War I, and World War II. In the post–World War II years, the US debt-to-GDP ratio remained at low, sustainable levels until the 1980s.

The Reagan Years

Since 1980, the US debt-to-GDP ratio has been constantly increasing. By the end of 2000, about half of the total publicly held federal government debt outstanding had been accumulated in the 1980s. According to the Federal Reserve Bank of San Francisco, two main factors contributed to this growth:

(i) Receipts fell due to reductions in both personal and business taxes starting in 1981

(ii) Expenditures on the defense budget increased

After the New Millennium

During the past 25 years, the US debt-to-GDP ratio has continued to grow at an even faster pace. Notable events include:

• The significant increase in public debt during the financial crisis of 2008–2009
• The pandemic of 2020–2022. The largest Western economies had already been increasing their debt-to-GDP ratios before 2020; however, the pandemic appears to have accelerated this trend

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Exploring Debt-Servicing Costs in Western Economies

After investigating the US debt-to-GDP ratio from a historical perspective, we will assess debt servicing for the US and selected European countries. Please note that these numbers are rough estimates and include calculations; therefore, the actual figures may significantly differ.

Table: Estimated Tax Revenue, Debt Servicing & Policy Rates

Country	Estimated Tax Revenue 2025 (billion USD)	Estimated Debt Servicing 2025 (interest, billion USD)	Central Bank Policy Rate (Early 2026, %)
USA	5,200 (Federal Government)	970	3.50-3.75
Germany	1085	43	2.00-2.15
France	540	70-75	2.00-2.15
Italy	700 (calculation)	100-110	2.00-2.15
Spain	420	(N/A)	2.00-2.15
United Kingdom	1120	140-150	3.75
Switzerland	280	1-2 (very low)	~0.00

 

The above table shows high interest payments relative to tax revenue for the United States, France, and Italy. The United Kingdom is in a better position, with high debt-servicing costs but correspondingly high tax revenue. Germany is in a much stronger position, and Switzerland is in an excellent position regarding debt servicing.

Moving to an alternative approach, we will now investigate the spread between US bonds of different maturities.

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Evaluating Future Economic Conditions Through US Government Bond Spreads

By analyzing the spread between bonds of different maturities, we can infer possible economic trends. Generally, longer-maturity bonds pay higher yields than shorter-maturity bonds because investors are committed for a longer period. There are three basic cases:

(i) When the 30-year US bond offers much higher yields than the 10-year bond, the market expects better long-term economic conditions.

(ii) When the 10-year and 30-year bonds have similar yields, the market suggests the economy is in a transition phase.

(iii) When the 10-year bond yields more than the 30-year bond (an inverted yield curve), the market indicates a potential future recession.

Currently, the 30-year US bond offers significantly higher yields than the 10-year bond, which is a positive development. These are the yields of the US government bonds:

• 30-year: 4.839%
• 10-year: 4.151%

This indicates that current market bond yields resemble case (i), which is encouraging news.

 

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Evaluating the Global Debt Outlook and the Risk of a Bond Market Crack -Conclusions

By examining government debt, deficits, and debt-servicing costs in the US and selected European countries, we can conclude that in the long term, the US, Italy, Belgium, and France face the greatest risks. Among these three, the United States appears to be in a far superior position.

 Evaluating the Risks of US Debt

As of early 2026, there is no immediate threat to the United States due to its debt, for several reasons:

• The cost of servicing the debt is high ($970 billion) but not extreme, given the size and strategic depth of the US economy
• US debt is denominated in dollars, and the Federal Reserve can directly purchase US bonds if needed
• Approximately 90% of US government debt is held internally by the Fed and domestic institutions
• There is constant demand for US Treasuries, as the dollar remains the world’s primary reserve currency

What is more concerning in the US is the expanding government deficit (6.5%). As these large deficits are forecasted to continue, the IMF expects US public debt to reach 143% of GDP by 2030. The critical question is: if the deficit is already high during a strong economy, what happens if a recession occurs? Deficits over 8-10% between 2028 and 2032 are not only possible but likely. Jamie Dimon’s warning about a potential "crack" in the bond market could refer to this scenario -what could happen if a major recession hits the global economy.

 Evaluating the Risks of Eurozone Countries:

Several Eurozone countries, including France, Italy, Belgium, and Spain, may face a debt crisis in the future. The situation is worse in Europe than in the US for several reasons:

• Weak economic growth in the Eurozone, combined with a lack of coordination among European politicians to address major issues such as high energy costs for manufacturing
• The expansion of defense budgets in many European countries will further increase government deficits
• France faces perhaps the greatest threat, as a very high government deficit compounds its growing debt-to-GDP ratio, and French society is unlikely to accept a new ‘social contract’ with its policymakers

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Final Verdict: Challenges Expected in 2027-2032

For the time being, the debt servicing of Western economies is under control, and there are no major concerns for 2026, assuming, of course, there will be no significant geopolitical events jeopardizing financial stability. However, for the period 2027-2032, conditions could become very challenging, as neither the US nor major Eurozone members like France and Italy are prepared to handle the fiscal impact of a recession. If a recession occurs, government deficits could exceed 8-10%, potentially triggering the "crack" in the bond market that Jamie Dimon has warned about.

 

Sources:

• https://www.imf.org/-/media/files/publications/weo/2025/october/english/ch1.pdf
• https://www.imf.org/-/media/files/publications/fiscal-monitor/2025/english/ch1.pdf
• https://www.nasdaq.com/articles/jamie-dimon-warns-inevitable-crack-bond-market-what-investors-need-know

 

■ Assessing Global Debt and the Risk of a Debt-Driven Crisis in Western Economies (2026-2030)

Giorgos Protonotarios, Investment Analyst

for TradingCenter.org (c), January 9th, 2025