“You look at debt to GDP in Japan, it's closing in on 300%. You look at China, it's closing in on 200%. We're just over 100%. I don't know what the structural speed limit is, but it's not here.”
Masters in Business · October 2026
Barry Ritholtz asked how much deficits are driving bond yields higher. Michele says he is "over" the righteous indignation about government debt. He argues that debt service of roughly 3.5% of GDP is still reasonable, even if governments have lost their discipline.
Transcript
…America, will source and originate loans. We'll have a look at them and do a fiduciary look. If they make sense for some of our client base, then we'll put it into our portfolios. The convergence between public and private is happening everywhere. I think it's healthy for the bond markets.
So let's talk about a few other things besides inflation that are driving yields higher. How do you look at the current set of deficits? How significant has that been to what's going on in bond markets? And is that a key factor with yield or is that just one of many factors?
…go here and sell. Do we need to go out for dinner? No, probably not. We can eat at home. Everyone is doing that, yet we look at governments and they don't seem to have that discipline anymore. And it's not just the U.S. We're learning it's happening in France. We're learning that it's about to happen in Germany. Has it gone on in Japan and China for a while? It has. I'm over it. I'm over it. You look at debt to GDP in Japan, it's closing in on 300%. You look at China, it's closing in on 200%. We're just over 100%. I don't know what the structural speed limit is, but it's not here. Perhaps a more interesting measure is to look at debt service to GDP. Where does that become a problem? Where does it look stretched? Maybe the total amount of debt service payments to GDP at close to 5% is a historic high level for the US. But we're in the mid threes right now. To me, that's still pretty reasonable. So there was a lot of low coupon financing that's gone on at the government…
And if memory serves, I'm doing this off the top of my head, 10% is where countries really run into trouble. If their debt service is 10%, of their gdp that's really problematic.
Yeah and and then you're hunting the math on how much debt the u s would have to issue to get there i don't even know if we could spend it all you're not given five thousand dollar checks terry what i don't maybe you're given five million dollar checks to everyone.
That would be inflationary we would have to worry about that so so there has been some hesitancy uh... when we look at these treasury auctions from foreign buyers I know you've pushed back on the sell America narrative. What are your thoughts on how attractive U.S. treasuries are today around the…
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