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Canada’s Banking Overhaul: New Proposal to Ease Lending Rules and Boost Economic Growth

Canadian Banking Regulator Proposes Easier Lending Rules for Banks to Boost Economy and Competition

By Naimul Karim, Financial Post — November 20, 2025

Canada’s top banking regulator, OSFI, now suggests softer lending rules. OSFI wants to free bank capital. This change aims to boost lending and investments. It helps the economy grow in a fast-changing financial world.

Proposed Changes to Risk Weights

OSFI has new plans. The bank must now check loan risks in a different way. OSFI will lower risk weights for loans to small and medium businesses. The weight drops from 85% to 75%. Regulators use risk weights to mark how likely a loan is to default. A high risk weight forces banks to hold more capital. Lower weights mean banks can use capital for lending and other tasks.

OSFI also sees lower risk in low-rise residential projects. It plans to drop their base risk weight from 150% to 130%. For loans that meet at least 75% pre-sales, risk weights drop further. This step gives a boost to real estate loans while keeping risks in check.

Economic and Competitive Rationale

Jacqueline Friedland, OSFI’s executive director, keeps risks managed and banks flexible. She said these precise changes open more capital for loans and investments. At the same time, the government pushes for more competition in Canada’s finance market. Recent budgets now support smaller, alternative banks. Ottawa cuts fees and makes switching chequing accounts easier. These steps could change Canada’s banking scene for the better.

OSFI also starts a 90-day public check. This period lets banks and the public share ideas. The goal is to ease lending rules without adding extra risk.

Banks Have Room to Lend More

OSFI Superintendent Peter Routledge said banks now hold strong capital reserves. He claimed banks might lend nearly $1 trillion more. This amount is large when compared with Canada’s roughly $3-trillion economy. Routledge noted that these buffers should not sit idle. He said banks should use them to fuel growth. More lending to businesses and customers can help during trade disputes and other challenges.

Next Steps

Industry experts and the public can now review the new ideas. Their feedback will help OSFI shape the final rules. Draft regulations may come by spring 2026. Banks may soon have more room to support new business and consumer credit. This change can spark economic growth and make the banking scene more competitive.

For continued coverage on Canada’s banking regulations and economic developments, subscribe to Financial Post.

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Scotiabank Executive Shakeup: Chief Risk Officer Phil Thomas Takes on New Strategic Role Amid Workforce Cuts

Scotiabank Announces Executive Shuffle, Moves Chief Risk Officer Phil Thomas to New Role

By Naimul Karim, Financial Post | November 18, 2025

Scotiabank reshuffles its senior team. It names Phil Thomas as Chief Strategy and Operating Officer. Thomas was the Chief Risk Officer. He starts his new role in December. The bank makes this change to build strong leaders during its shift in structure.

Leadership Transition

Phil Thomas led risk management when challenges arose. He steered the bank during COVID-19 and trade issues. Now, he takes on strategy and operations. CEO Scott Thomson praises him for lifting risk management when change was rapid. His work built trust in the bank’s risk stance.

Shannon McGinnis takes over as Chief Risk Officer. She served as Deputy Chief Risk Officer. Before joining Scotiabank in 2024, she gained 30 years of risk experience at another bank.

Anique Asher shifts roles next. She was Chief Strategy and Operating Officer for 18 months. Now, she becomes Executive Vice-President of Real Estate Secured Lending. The bank names Tracy Gomes as Chief Risk Officer for Canadian Banking, Global Wealth Management, and Credit Risk. It also appoints Meigan Terry as Chief Global Corporate and Public Affairs Officer.

Context: Transformation and Workforce Changes

The bank made cuts in its Canadian operations recently. Aris Bogdaneris, Head of Canadian Business, sent a memo about the hard choices ahead. He noted that the bank must cut tasks that waste time and add little value. He said goodbye to valued colleagues with respect.

Looking Forward

Scott Thomson says these changes build talent and strengthen leadership. He adds that they help drive steady, healthy growth. The refresh of roles prepares the bank to face global trade shifts and other risks. Phil Thomas now also eyes threats like U.S. tariffs on Canadian goods.

About Scotiabank

The Bank of Nova Scotia, known as Scotiabank, stands as one of Canada’s largest banks. It offers services in personal and commercial banking, wealth management, and corporate and investment banking.

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ECN Capital Corp. to Go Private: A $1.9 Billion Acquisition Deal Led by Warburg Pincus

ECN Capital Corp. to Be Taken Private in $1.9 Billion Deal Led by Warburg Pincus

By Barbara Shecter, Financial Post – November 13, 2025

ECN Capital Corp. is a well-known financing firm that started nearly ten years ago. It now faces a change. An investor group led by Warburg Pincus LLC will buy it with cash. The deal pays $3.10 for each common share. This price is 13% above the last closing price. The business is now valued at about $1.9 billion.

Transaction Overview and Timeline

The deal needs a few approvals. Regulators and courts must give the go-ahead. The buyout should close by mid-2026. ECN Capital’s Board of Directors supports this plan. They see few conditions. They call the terms fair for the firm and its shareholders.

Strategic Rationale Behind the Sale

Steve Hudson runs ECN Capital. He also holds seven percent of the company. He said that now is the right time to sell the remaining finance parts of the firm. These parts have grown strong. They can gain from the vast funds that large banks or big private equity teams like Warburg Pincus have.

He explained, "When a business grows this much, it helps to join a bank, an insurance firm, or a solid private equity group. They give more financial strength than a smaller company like ours."

Historical Context and Growth Strategy

Steve Hudson recalls his past at Newcourt Credit Group in the 1990s. That company had trouble funding long-term loans with short-term bills. The model did not work well. At ECN Capital, he chose a different plan.

Under his lead, ECN Capital made a smart move. In 2021, it sold its service finance unit to Truist Bank for US$2 billion. This was a sharp rise from the US$309 million price in 2017. Hudson noted that Truist has a strong capital base and a knack for financing, including selling loans to investors. This move helped the business grow beyond ECN’s own reach.

Remaining Operations and Shareholder Returns

After selling two big parts—the service finance unit and another unit to Stone Point Capital LLC—the firm now works on two areas. It focuses on financing manufactured homes, as well as recreational vehicles and marine craft. Its assets total about US$7.6 billion.

Since 2016, ECN Capital has generated more than 200% return for its shareholders. The management sees the new deal as a chance to give shareholders cash and return more funds.

Market and Industry Implications

This sale shows a trend. Mid-sized financing companies now join bigger groups. They seek the stronger funds and rapid growth that come with large financial teams. Warburg Pincus’s action shows they trust the growth of ECN Capital’s key areas.

About ECN Capital and Warburg Pincus

ECN Capital Corp. earns respect as a focused financing firm. It works mainly in niche areas like manufactured housing and recreational vehicle finance. The company has grown a lot since it split from Element Fleet Management Corp.

Warburg Pincus is a global private equity firm. It invests in growing sectors and companies. The firm brings strong resources and capital to help expand businesses.

For further updates and detailed analysis on this transaction and its impacts on the financial services sector, stay tuned to Financial Post.

Contact: Barbara Shecter at bshecter@nationalpost.com

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Why Canadians Shouldn’t Covet 50-Year Mortgages: The Hidden Costs of Long-Term Loans

Why Canadians Shouldn’t Envy American 50-Year Mortgages

We see discussions in the U.S. about mortgages that last 50 years. People mention long terms and low monthly payments. Experts warn that long terms come with high costs.

The American Proposal: 50-Year Fixed-Rate Mortgages

U.S. President Donald Trump raised the idea of 50-year fixed-rate mortgages. He links long terms with lower monthly payments. He hopes that stretching payments over 50 years will ease home buying. This plan stands apart from Canada’s way of doing things. Canadian borrowers choose short-term rates. They often pick five-year commitments even when the total payment schedule runs for 25 to 30 years. In Canada, borrowers do not lock rates for decades. They face many rate renewals as market conditions change.

The Canadian Experience: Shorter Terms, Recurring Renewal Shock

Today, 1.8 million Canadian homeowners get close to a mortgage renewal. Many see higher rates than they had in 2021. Economists note that higher rates limit extra spending. They add that strict lending standards help avoid mass mortgage failure.
Many Canadians choose five-year fixed terms. They feel that short terms offer safe, stable choices in risky rate times. Some pick 10-year terms, yet these do not win favor because longer terms get higher rates.

The Costs of Long-Term Stability

Locking a rate for many years seems safe. But long terms also bring high fees. Janet Gao, from Georgetown University, explains that low fixed rates often cost large fees at the start. She adds that 30- and 50-year mortgages in the U.S. have higher rates than Canadian five-year fixed ones.
Borrowers risk steep penalties if they break a long-term mortgage early. Divorce or sudden changes may force a borrower to pay hard fees on the remaining years. Shawn Stillman, CPA and mortgage broker, says that Canadian banks prefer shorter terms. He links this to Canadian banks using five-year bonds. The banks also must manage higher risk in long terms.

Not a "Free Lunch"

Longer terms bring relief in monthly payments. Yet they do not trim the total cost of borrowing. Gao tells us, "It’s not a free lunch." U.S. banks build ways to handle long-term risks. Borrowers may miss the fact that total interest over 50 years is much higher. Upfront fees add to a long mortgage’s overall cost.

Conclusion

The idea of a 50-year mortgage may seem like a fix for housing costs in the U.S. However, Canadians must study the risks and costs before wishing for the same product. Extended rate security also means higher rates, more fees, and costly penalties.
For now, Canadian short and frequent mortgage terms offer flexibility even with some uncertainty. Homeowners and buyers must check their money matters carefully. They should not assume that a longer mortgage makes housing easier or cheaper.

This article is based on insights from Garry Marr’s report in the Financial Post. It shows key differences between Canadian and U.S. mortgage views and explains why Canadians might not gain from longer mortgage terms.

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Riding the Wave: How the Blue Jays’ World Series Journey Boosts Rogers’ Valuation and Future Potential

How the Toronto Blue Jays’ World Series Run Could Boost Rogers Communications’ Valuation

By Garry Marr, Financial Post — November 7, 2025

The Blue Jays played hard in 2025. They almost won the World Series. They reached Game 7 but lost to the Dodgers. The team’s brave playoff run helps Rogers Communications. This help goes far beyond the baseball field. Rogers is Canada’s biggest telecom company.

More Than Just a Baseball Story: The Business Stakes

Rogers owns key sports assets. It holds a 75% share in Maple Leaf Sports & Entertainment Ltd. (MLSE). MLSE runs the Toronto Maple Leafs (NHL), the Toronto Raptors (NBA), and Toronto FC (MLS). Rogers also owns the Toronto Blue Jays entirely. These teams boost Rogers’ brand and revenues.

Rogers plans to spin off its sports teams into a separate company. The Blue Jays’ deep playoff run can raise the new company’s value. The run refreshed the team’s fan base in Toronto and across Canada. Ticket sales, merchandise, and viewership all grew, and these factors help raise the valuation.

Valuing Rogers’ Sports Empire

Rogers’ CEO Tony Staffieri estimates the sports assets are worth over $15 billion. Independent reviews back this number. A National Bank report values the MLSE teams at about US$10.2 billion. In that review, the Raptors are worth US$5.22 billion, the Maple Leafs US$4.25 billion, and Toronto FC US$730 million. The Blue Jays stand at roughly US$2.39 billion. In addition, the Blue Jays’ value increased by 5% in the last year before the playoffs.

Potential for a Public Offering and Acquisition

Rogers wants to buy the remaining 25% of MLSE. This stake is owned by Larry Tanenbaum’s Kilmer Group. The company hopes to finish this deal in the next 18 months. Rogers may then offer its sports assets to the public. Investors and fans may find these teams very attractive. The Blue Jays’ playoff run shows strong competition and boosts fan interest.

Revenue Gains from Playoff Success

The Blue Jays’ playoff games drove real revenue. Stadium seats filled up, and ticket sales soared. The team shares postseason gate receipts with its players. For Wild Card games, players get 50% of the receipts. In the Division Series, League Championship Series, and World Series, the players get 60% for the early games. Deep playoff games, like Game 7, add valuable money to the club. In 2024, players received about US$129.1 million from these revenues. Merchandise, sponsorships, and ads also helped Rogers earn more.

What If the Blue Jays Had Won?

A championship win would have created even more revenue. Still, the near win boosts Rogers’ outlook. The close series generates excitement. This energy keeps fans loyal. In sports business, fan loyalty is very valuable.

Looking Ahead

The Blue Jays’ run was not just a sports story. Their effort on the field creates financial ripples off the field. Rogers plans to strengthen its ownership and may offer its sports teams to the public. This playoff run adds value that could last for years. The Blue Jays have helped shape the future of one of Canada’s top sports and media companies.

Toronto Blue Jays’ Ernie Clement celebrates with George Springer after scoring on a double by Andrés Giménez during the sixth inning of Game 7 of the World Series against the Los Angeles Dodgers, Nov. 1, 2025, Toronto.

Photo by AP Photo/Brynn Anderson

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UC Investments Seeks to Acquire 10% Stake in Big Ten Conference: A Bold Move in Sports and Investment

University of California’s Investment Arm Seeks 10% Stake in Big Ten College Sports Conference

By Barbara Shecter | Published November 10, 2025

The University of California owns a pension fund. UC Investments now aims to buy a 10 percent stake in the Big Ten Conference. The fund moves to join one of the top and rich college sports groups in the United States.

Jagdeep Singh Bachher leads UC Investments. He works as chief investment officer and vice-president of investments. At a Toronto conference on Monday, he shared the plan. He manages a portfolio worth about US$180 billion. He said the offer was made recently. He hopes the deal will close by November 21. “We just made an offer to buy 10 percent of the Big Ten, which is the big sports conference in the U.S.,” Bachher stated. He also holds the role of chancellor at the University of Waterloo. He spoke at a conference put on by the Canadian university.

The Big Ten Conference hosts well-known sports events. It runs events like the Rose Bowl with pride. It wins money from long TV contracts, including a deal with Fox Sports. These tight links help the conference earn large revenues. They make it a strong place for investment.

Earlier reports on Yahoo Sports from October 10 noted talks to put about US$2.4 billion into the 18 schools of the Big Ten. Investors want to form Big Ten Enterprises. This group will run the conference’s commercial work. Other major funds like Apollo Global Management and Blackstone showed interest too.

Frontofficesports.com explained that the plan would spin the Big Ten’s assets into a private fund. That fund would be known as Big Ten Enterprises. UC Investments would then own 10 percent of the new company. The agreement asks all Big Ten schools to sign a grant of rights. This deal would bind the schools to the conference until 2046. Still, some university board members worry. They open debates about the plan.

Bachher explains that his bid is not just venture capital. He speaks of buying what he calls “cultural capital.” He sees sports as a key link. Sports bring together technology, media, and youth today.

“I think the future for our young generation is the one thing that glues people to technology and content: sports,” Bachher said. He mentioned the recent buzz when the Toronto Blue Jays ran to the World Series. They lost in seven games to the Los Angeles Dodgers, yet the effort was memorable.

Bachher added that the chance stretches beyond old-school sports. It covers eSports, media, entertainment, and tech too. “That creates a whole unique set of opportunities… There’s an incredible opportunity set there. So that’s where I’ve been just immersed, in that whole area. It’s been a lot of fun,” he said.

He spoke in a joint session with Orlando Bravo, founder and managing partner of Thoma Bravo. Bravo’s firm works with software investments. For the past 100 days, Bachher focused hard on sports deals. This focus shows a clear shift in the fund’s strategy.

Bachher did not share more on the bid at the Toronto event. Still, the move connects big institutional funds with college sports. The deal, if it goes through, may bring more private money to collegiate athletics and change its financial world.

Contact: Barbara Shecter at bshecter@nationalpost.com

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A Second Chance: The Unseen Financial Gains for the Blue Jays After Their Heartbreaking World Series Loss

Moneyball: Assessing the Financial Impact of the Blue Jays’ Near World Series Triumph on Rogers Communications

By Garry Marr, Financial Post – November 7, 2025

The Blue Jays reached the 2025 World Series. They battled hard and lost Game 7 to the Los Angeles Dodgers. This race meant more than a chance for a title. It changed how investors view Rogers Communications Inc. The company is Canada’s largest telecommunications firm and owns the Blue Jays. Rogers now sees that each close link between performance and profit matters.

Rogers’ Sports Holdings: A Valuable Sports Empire

Rogers holds two big sports assets. One is a 75% share in Maple Leaf Sports & Entertainment Ltd. (MLSE). MLSE owns the Toronto Maple Leafs (NHL), the Toronto Raptors (NBA), and Toronto FC (MLS). The other is a full 100% interest in the Blue Jays (MLB). Rogers’ CEO Tony Staffieri recently set the worth of these assets at over $15 billion. In a report, the National Bank of Canada valued the MLSE teams at about US$10.2 billion. The Raptors were at US$5.22 billion and the Maple Leafs at US$4.25 billion. Toronto FC was valued at US$730 million. The Blue Jays were pegged at US$2.39 billion. Their value grew five percent in just one year. This was before their striking playoff run.

Playing for Keeps: Preparing for a Public Offering

Rogers plans to own all of MLSE soon. The company will buy the remaining 25% share from Larry Tanenbaum’s Kilmer Group in about 18 months. Rogers then wants to spin off its sports assets into a public company. Investors who care about sports may find this plan attractive. The Blue Jays’ playoff push has lifted interest among fans in Toronto and across Canada. This surge boosts ticket sales, merchandise, and media attention. These benefits support Rogers’ goal to raise the sports business’s market value before it goes public.

The Financial Upside of Playoff Performance

A World Series title would have brought extra cash, but the playoff run still carries big rewards. In Major League Baseball, gate receipts help both players and teams. Every extra day in a full best-of-seven series moves revenue closer to the team. The players share half of the receipts from Wild Card games. They then get 60% for early playoff rounds and four games in the League Championship Series and the World Series. The winner earns the biggest pot, but the runner-up still gets a good share. In 2024, players gained US$129.1 million from playoff ticket shares. This is more than the US$107.8 million in 2023. The longer playoff series of the Blue Jays added extra energy to Rogers’ ticket revenues.

Merchandise, Media Rights, and Branding Impact

Merchandise sales rise when teams do well. Advertising money also grows as more people watch the games. The excitement over the Blue Jays’ Game 7 chase lifts the team’s brand. This boost helps Rogers earn more from media and merchandise. When a team wins hearts, the money follows on and off the field. Rogers will soon spin off these assets, hoping to catch this wave.

Conclusion

Even though the Blue Jays did not become champions, their playoff run helped Rogers Communications. The team’s shortfall did not stop a fresh surge in fan support, ticket sales, and media buzz. These gains lift the value of Rogers’ sports assets before the public offering. A win might have given an immediate bonus, but steady growth and strong brand value matter most to investors. Rogers will watch these trends closely as it plans its next steps.

The Financial Post’s sports and finance coverage will continue to track changes in how teams and companies work together.

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Unraveling the Debt Web: How Soaring Government Deficits Could Ignite the Next Financial Crisis

How Soaring Government Debt Could Play a Starring Role in the Next Great Financial Crisis

By Barbara Shecter | Published October 27, 2025

Governments now face huge debts. They see deficits that risk global economic calm. Experts now warn that the U.S.—the world’s main engine—could spark or worsen the next major crisis because of its growing red ink.

The Growing Wall of Debt

Since the COVID-19 crisis, U.S. debt has shot up. It now reaches about US$37 trillion. Each year, a deficit of nearly US$1.8 trillion adds up. This figure is about 6% of GDP. Spending cuts have not slowed this rise. Deep political divides and a missing fiscal plan make debt cuts hard.

In April 2025, debt caught public attention. President Donald Trump put double-digit tariffs on over 80 countries on “Liberation Day.” At first, investors ran from stocks. They chose safe assets like U.S. Treasury bonds. Soon, however, this flight ended.

Rising Yields and Investor Anxiety

Bond prices then dropped. Yields climbed. Investors now ask for higher returns as risk grows. Ten-year Treasury yields hit 4.5%, up from 3.9%. Meanwhile, 30-year yields moved past 5%. This jump alarmed many economists.

Mark Manger, director of the Global Economic Policy Lab at the University of Toronto’s Munk School, has studied debt crises in Argentina and Nigeria. He sees this rise as strange in the market known for safety. “It is the part where observers are starting to freak out,” he said. His words show that investors now worry that rising yields harm the famed U.S. Treasury bond.

Higher yields also mean that paying back debt may hurt the economy. The U.S. Treasury market, a key part of global finance, may no longer seem the safest spot.

Potential Global Fallout

This warning goes far beyond the U.S. U.S. Treasuries and similar bonds sit at the heart of debt markets. Many banks, pension funds, and central banks hold them. A drop in their value might shake global finance.

Juan Carlos Hatchondo, an economics professor at Western University, studies sovereign debt. He explained that U.S. Treasuries work as collateral in repo deals. These deals help banks keep cash flowing overnight. If their value falls, liquidity in the system will suffer.

Foreign governments also hold these bonds. A drop in value would hurt their reserves and worsen economic shocks. In our connected system, one bad sign may start a global chain reaction.

The Looming Crisis?

A February 2025 study by the Brookings Institution said that a full U.S. default is not needed to cause a crisis. The fear of a strategic default or poor fiscal management alone might shake faith in U.S. debt. This loss of trust lowers asset values, weakens banks, and may spark a worldwide recession.

Reports from the Financial Post note that the debt crisis is not only in Washington. From Canada to the U.K. and Japan, high debts unsettle markets. Yet, the U.S. holds a special weight on the world scene. Its fiscal health can shift global economics.

What Lies Ahead?

With Canada’s Federal Budget on November 4th and similar events around the globe, all eyes are on governments. Political gridlock, high debt, and fears over safe assets put policymakers to the test.

For now, soaring U.S. government debt darkens the future of financial stability. The coming financial crisis may depend on how well the U.S.—the largest economy—manages its fiscal path and how investors see these moves.

For continued in-depth analysis on government debt and its global implications, visit FinancialPost.com and stay tuned for daily updates throughout the fiscal season.

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Major Banks Follow Bank of Canada: Prime Rate Cuts Make Borrowing Cheaper!

Canadian Banks Lower Prime Rates Following Bank of Canada’s Cut

October 29, 2025 – The Bank of Canada cut its policy rate. Canadian banks then lowered their prime lending rates by 25 basis points. On October 30, the prime rate drops from 4.70% to 4.45%.

On Wednesday, the Bank of Canada lowered its policy rate by a quarter point to 2.25%. It did this to boost economic activity. Major banks acted quickly. Royal Bank of Canada, TD Canada Trust, Bank of Montreal, Canadian Imperial Bank of Commerce, National Bank of Canada, Desjardins Group, Laurentian Bank of Canada, and Bank of Nova Scotia all changed their rates.

The prime rate is a key benchmark. It guides lending on lines of credit, variable-rate mortgages, and loans. Lowering the prime rate cuts borrowing costs. Consumers and businesses then spend and invest more.

This move is part of a wider monetary plan. The plan works to control inflation and aid growth. Cutting prime rates helps lower borrowing costs for households and companies.

Financial experts say borrowers should note these changes. Lower prime rates can reduce interest on variable-rate debts. They also create better conditions for new loans.

For more detailed coverage and updates on economic and financial news, subscriptions to the Financial Post offer extensive access to such content.

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Red Ink Rising: How Exploding Government Debt Could Trigger the Next Financial Crisis

How Soaring Government Debt Could Play a Starring Role in the Next Great Financial Crisis

By Barbara Shecter | Published Oct 27, 2025

Governments around the world carry heavy debt. They face rising worry about what this debt may cause. The United States, which drives the global economy, sits in a risky spot. If the U.S. runs into fiscal trouble, markets everywhere may fall hard.

The Increasing Burden of Sovereign Debt

Sovereign debt climbs fast in recent years. Pandemic costs, economic boosts, and budget gaps push the debt higher. The U.S. holds about US$37 trillion in debt. It runs a yearly deficit near US$1.8 trillion – about six percent of its GDP. Even as people like Elon Musk plead for less spending, the deficit barely slows down.

Many countries grow their debt too. Yet the United States matters more because it issues U.S. Treasury securities. These bonds support global finance. Pension funds, banks, and foreign governments all hold large amounts of them.

Troubling Signs from the Treasury Market

This year, market changes signaled trouble. After President Donald Trump set steep tariffs on over 80 countries – a day some called "Liberation Day" – investors ran from unstable stocks. They moved into U.S. Treasury bonds, and yields dropped. Soon, yields on 10-year bonds jumped from 3.9% to 4.5%. Thirty-year yields went past 5%.

When yields rise, bond prices drop. This fall shows that investors worry about U.S. debt. Mark Manger from the University of Toronto’s Munk School pointed out that this move looks like a warning seen in risky markets like Argentina or Nigeria. He said, "This is the part where observers start to freak out… because it’s not supposed to be like this."

Risks of a U.S. Debt Crisis

A drop in trust for U.S. Treasuries has huge risks. Investors see U.S. debt as the benchmark safe asset. A crisis here can shake global markets. It may lower asset prices, unsettle banks, and push economies into recession.

Research from the Brookings Institution explains that a crisis need not wait for a default. The fear of unsustainable debt may trigger panic and capital flight.

Juan Carlos Hatchondo from Western University highlights the risk. U.S. Treasuries often act as collateral in repo deals. If their value falls sharply, daily banking and market trades can break down. Many foreign governments store reserves in U.S. debt. A drop in value may weaken their finances and spread instability today.

Political Challenges Compound the Problem

The debt issue worsens with U.S. political fights. Sharp political divides make sound fiscal plans hard. Sudden policy shifts, like those seen after the tariff move, hurt market trust. This doubt stops leaders from taking clear steps to fix the debt. In the near term, any plan to manage the swelling debt seems hard to reach.

Looking Ahead

With the November 4 Federal Budget near, Canada and other nations face their own debt matters in a tougher world. Yet the U.S.—with its large role in finance—stays the main focus.

Investors, policymakers, and economists keep a close watch. High government debt, tense political fights, and shaky markets mix into a storm. This storm might lead to the next great financial crisis, one with global consequences.

For continuous coverage of sovereign debt and deficits, stay tuned to FinancialPost.com.

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