Paulson warns US needs plan for potential Treasury demand collapse

Henry Paulson warned that the U.S. needs a contingency plan if demand for Treasuries collapses, and the odds of a U.S. recession by the end of 2026 sit at 23% YES on Polymarket.

Paulson’s remarks come amid rising Treasury yields and constrained demand tied to inflation and geopolitical tensions from the ongoing U.S.-Iran conflict. Traders in the U.S. recession market are anticipating a 15-point move. The December 31 sub-market, 259 days from resolution, is where these concerns are concentrated.

There has been no trading activity in the past 24 hours, which means the odds movement is driven by sentiment rather than immediate liquidity. The market’s face value remains at $0, suggesting traders are holding back until more actionable data appears.

Paulson’s warning points to a real possibility that Treasury demand could fracture under current conditions. A YES share at 23¢ pays $1 if a recession is declared, yielding a 4.35x return. That’s a bet on worsening economic indicators like rising unemployment or further yield curve inversion. Any fiscal stimulus measures or Fed interventions could shift the recession probability.

Signals to watch: Fed statements, Treasury updates, and geopolitical developments that could further weaken Treasury demand. Powell’s next Fed briefing and any moves from the Treasury Secretary will directly shape market expectations.

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