As Joe Biden grows into the US presidency, he faces a growing math problem. How does a traumatized economy afford a US$4 trillion-plus Covid-19 rescue bill at a moment when investors might be less willing to lend to you?
Since a bad US inflation report last month, Treasury bond yields have moved higher amid fears the Federal Reserve might pull back on support for the economy. Turmoil reached a fever pitch on March 12, in what the Financial Times termed a brewing financial “storm.” It sent 10-year yields toward 1.7%.
Though negligible historically-speaking, rising borrowing costs are a clear and present danger for a US bumbling toward a $30 trillion debt burden. The disconnect between surging debt and demand for it will tantalize traders for weeks to come.
“There will be no peace until US 10s reach 2%,” says Kit Juckes, global macro strategist at Société Générale.