Goldman's Waldron says debt now tops tariffs on bond traders' fear list

Bond traders are becoming increasingly spooked by mounting levels of US government debt — and it’s now a concern that holds more risk than tariffs, according to Goldman Sachs Group Inc.’s president.

“While all the attention was on tariffs, I think the attention rightly is shifting — certainly in the bond market — to the US budget debate and the fiscal picture, which I would characterize as somewhat concerning,” John Waldron said at a Bernstein conference Thursday. “I think the big risk on the macro right now is actually not so much tariffs.”

The investment banker made the case that a rise in US Treasury borrowing is lifting interest rates, particularly on the longer end of the yield curve. That’s making debt more expensive for the US government, and adds to the risk of a growing deficit and rising borrowing costs across the economy.

Waldron, who’s widely viewed as the front-runner to be Goldman’s next chief executive officer, made the comments a week after the US 30-year borrowing costs rose to a level just shy of a two-decade high. President Donald Trump is wrestling with Congress over a bill that promises to cut taxes for some constituencies, which many fear could worsen the US fiscal outlook.

His caution about the longer term was also echoed by Rob Kaplan, Goldman’s vice chair and former president and CEO of the Federal Reserve Bank of Dallas, who said on Bloomberg TV that the firm’s clients were focused more on the 10-year Treasury yield than on the federal funds rate.

Still, Waldron said, the US economy is showing signs of strength. “But I would have to say the US economy and the US consumer is showing tremendous resilience,” he added. “Somewhat surprising to me, but I think you have to say the resilience in the economy is pretty pronounced.”

The executive cautioned that Goldman’s investment-banking revenues in the second quarter, hampered by tariff-induced volatility, are trailing the preceding three months — confirming a trend in analyst estimates compiled by Bloomberg.

Waldron still tried to reassure investors he was upbeat about the outlook for initial public offerings. 

“We priced eight IPOs last week,” he said. “So that’s a pretty good sign that things are starting to thaw.”