Treasury Borrowing Reaches Pandemic Levels, Threatened by Weaker Fiscal Positions and Fed QT Concerns

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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 ( the duration of QT, and annual deficits projected at around $1.7-$1.8 trillion ( over the next few years, these issues are unlikely to go away soon.”

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“At the same time, a widening mismatch between supply and demand for USTs could exacerbate the issue through increased debt interest expenses.”

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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.


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