CITADEL Securities President Jim Esposito said the US deficit and mounting government debt levels are a “ticking time bomb,” adding his voice to the chorus of financial executives soundings warnings about America’s deteriorating fiscal outlook.
Esposito, who joined Citadel Securities from Goldman Sachs Group Inc. last year, said how President Donald Trump’s administration responds to the situation will be “super important.”
“I do think the stock of debt and the budget deficit is a ticking time bomb,” Esposito said Thursday at a Piper Sandler conference. “No one is smart enough to predict when exactly it will rear its ugly head.”
His comments echo those from JPMorgan Chase & Co. chief executive officer Jamie Dimon, who late last month warned that there will be a crack in the bond market after the US government and Federal Reserve “massively overdid” spending and quantitative easing.
Goldman’s president John Waldron said recently that US debt levels hold more concern for bond traders than Trump’s tariffs policies.
Still, Esposito said he wasn’t suggesting there will be a “UK bond market moment,” where former Prime Minister Liz Truss tried to push through a large package of unfunded tax cuts. Her mini-budget caused investors to dump long-term UK bonds — setting off a chain of events that ultimately led to her resignation.
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“But are we watching and are we focused on ensuring a consistent and safe rolling of our debt stock — it’s critical,” Esposito said. “We’re definitely pushing that upper bound of what is sustainable.”
Worry about the budget deficit picked up in May tied to a tax-cut bill moving through Congress. The House-passed version of the tax and spending bill would add US$2.4 trillion to US budget deficits over the next decade, according to an estimate from the nonpartisan Congressional Budget Office.
Volatility like that set off by Trump’s policies typically benefits Miami-based Citadel Securities, which handles the elevated trading. The firm reported record profit and trading revenue in the first three months of the year, buoyed by such market swings.
The market-making giant founded by billionaire Ken Griffin has been growing its presence across asset classes and geographies, launching into investment grade corporate bonds in 2023. The firm is looking to grow its presence in cryptocurrency trading under a new regulatory regime, Esposito said Thursday.
“Crypto has passed the point of no return, and it is an asset class that institutional investors, serious and sophisticated investors, are taking seriously,” he said. “As we get a rule set, I think that’s going to become a large and viable asset class that we will all participate in.” BLOOMBERG
