As a general rule what percentage of debt to gdp will make a government bond yields spike

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Dallas Stevens

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Yesterday, 00:48

As a general rule what percentage of debt to gdp will make a government bond yields spike

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Danica Bauer · Answer 1

There is NO general rule for the percentage of debt to gdp that will make a government bond yields spike

Derrick Valentine · Answer 2

There is no general debt-to-gdp ratio rule because a bond yield depends on many other factors, not only on debt-to-gdp ratio.

For example, the United States has a very high debt-to-gdp ratio of over 100%, but the US bond is considered to be the safest bond in the market, has a high credit rating of AA + according to Firtch, Moody's and S&P, and is a cheap bond because interest rates in the US are low, so the coupon payments are low as well.

The yield to maturity of a 10 year US bond is around 2%. Therefore, what all this information is telling us, is that even if debt-to-gdp ratio in the US continues to increase, the US bonds yields will probably continue to be stable. They will not spike because the debt-to-gdp ratio increases.