by Chris Black
Steven Zeng at Deutsche Bank notes the stunning (but hardly surprising) reality that Treasury borrowing is “now on par with levels during the 2020-2021 pandemic”.
“Both weaker fiscal positions and Fed QT are contributing factors.
With a growing view that the Fed may lengthen (t.me/marketfeed/427665) the duration of QT, and annual deficits projected at around $1.7-$1.8 trillion (home.treasury.gov/system/files/221/TreasuryPresentationToTBACQ42023.pdf) over the next few years, these issues are unlikely to go away soon.”
“At the same time, a widening mismatch between supply and demand for USTs could exacerbate the issue through increased debt interest expenses.”
This will continue as the Treasury repays its debts, and there is no way I can imagine it absent structurally persistent inflation and high yields.