When the market loses patience with high debt: The UK is not the only economy approaching a "tequila moment".

Asset management company Ashmore Group CEO Mark Coombs said that countries with fiscal deficits and reliance on financial market financing, such as the UK, "definitely" face the risk of experiencing another "Liz Truss moment." "One issue facing the UK currently is that we may be on the verge of experiencing such a moment again," he referred to the market turmoil caused by policy changes introduced by Truss, who was the UK Prime Minister in 2022. "If a country has a long-term deficit and relies on market financing, once the market loses confidence in it, it can not only lead to assets being repriced, but also to instances of buyers boycotting some term bonds." In September 2022, the Truss government introduced a large-scale deficit financing tax reduction policy as part of a series of new measures, leading to a surge in UK bond yields. The resulting market turmoil was so severe that she had to quickly abandon most of the measures, dismiss the Chancellor of the Exchequer, and resign only 44 days into her term. "Once confidence is lost, real trouble is faced, and the market indeed experiences shocks," the British billionaire stated. John Studzinski, Managing Director and Vice Chairman of Pacific Investment Management Company (PIMCO), holds a different opinion. "I don't think we will see another Liz Truss moment," he said at the same forum. "If you can predict in advance, there would be no sudden dollar crisis or other similar disturbances." "And as for that Liz Truss situation, I believe one-third can be attributed to Truss herself, and the other two-thirds should be attributed to Liability-Driven Investment (LDI)," he referred to the investment strategy adopted by pension funds, which exacerbated the market crash at that time. Coombs of Ashmore stated that there were some concerning signs in the sell-off triggered by tariffs in April, indicating market concerns about rising global debt levels. There was a period when the performance of the yield curve was somewhat abnormal, showing risk aversion, he said. Long-term bonds did not see a lot of buyers, whose reaction was not completely in line with everyones expectations. This indicates that the market is more inclined to hold short-term assets. Last week, UK Chancellor of the Exchequer Rishi Sunak announced a significant drop in UK government bonds following the abandonment of plans to increase the basic income tax rate in the upcoming UK budget. This Thursday, as the market prepared for Japanese Prime Minister Fumio Kishida's economic stimulus plan to be announced on Friday, Japanese government bonds saw further declines. With governments and businesses around the world heavily borrowing, global debt has soared to around $74 trillion. In just this year, global bond issuance has hit a record $5.95 trillion, with borrowers taking advantage of loose market conditions to finance projects ranging from the artificial intelligence boom to the revival of merger and acquisition activities.