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HSBC with the note.
The prevailing view now, as it was at the beginning of 2020, seems to be that rising budget deficits mean bond supply will increase, which in turn pushes bond yields higher. US debt sustainability was recently brought back into focus when the US credit was downgraded by a rating agency citing doubts about the fiscal trajectory (Fitch, 1 August 2023).
Consistent with the increased borrowing requirement, US Treasury refunding announcements have signalled increases in the sizes of bonds to be sold, turning every auction into a big market event. Related to the expanding US government’s borrowing has been the increase in risk premium on US Treasuries.
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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
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