BIS Warns of Fiscal Risks Amid $30 Trillion Debt Surge

- The Bank for International Settlements highlights financial instability risks as global stocks soar alongside rising government debt. - Investor premiums, credit downgrades, and hedge funds’ growing role increase market vulnerabilities, per BIS analysis. The Bank for International Settlements (BIS) has sounded the alarm over a widening gap between soaring global stock market valuations and mounting government debt, warning this trend could create financial instability. On September 15, 2025, Cryptopolitan reported on the BIS’s warning, which highlighted several red flags. These include a sharp increase in premiums on 30-year government bonds in major economies, recent credit downgrades for nations like the United States and France, and a deepening reliance on hedge funds to manage debt market activities. In a statement, Hyun Song Shin, head of the BIS’s Monetary and Economic Department, underscored vulnerabilities spreading across fiscal and asset markets. Shin questioned the sustainability of current equity market valuations, especially with signs of a slowing labor market in key economies such as the United States. He compared the present trend to the dot-com bubble era, cautioning that inflated stock valuations have historically triggered systemic instability. At the same time, tight corporate bond spreads are compounding stress on the financial landscape. The BIS also cautioned that hedge funds’ increasing involvement in government debt markets could become a double-edged sword, as these funds can act as conduits that amplify financial shocks. Shin stressed the importance of closely monitoring these “potential amplification channels.” Beyond fiscal risks, the BIS reported that persistent inflation remains a key concern, citing its latest survey of 31 economies, which showed global inflation expectations are staying elevated. Lingering price pressures from the COVID-19 pandemic continue to disrupt public sentiment, and while households still trust central bank independence, fears are growing that temporary inflation shocks could modify longer-term expectations. In the currency markets, the BIS flagged unusual deviations from historic patterns. A strong U.S. dollar in July coincided with gains in equity markets, which diverges from the usual correlation driven by interest rates. According to analysts, this unusual alignment, alongside high valuations in risky assets, signals the potential for abrupt corrections in the global economy. As a result, the BIS urged policymakers and investors to stay vigilant as these vulnerabilities accumulate across financial markets.