Global bond disorder: Transforming in the financial markets amid the high deficit in the United States
A major shift in the financial scene is reflected in the recent turmoil in the bond market, with the escalation of deficit in the United States plays a pivotal role.
What happened: As shown before IP Greg to Wall Street MagazineDespite the peak of 5 % in the fall of 2023, the Treasury returns for 10 years to its level at the beginning of the year, and sits by 4.55 %.
IP wrote that the increase in the return this week does not indicate a crisis or panic, but it indicates a shift in the financial markets. The days of abundant savings that follow rare bonds have ended, leading to an increase in borrowing costs for governments all over the world.
The United States emerges due to its annual deficit, which is expected to exceed $ 2 trillion and can touch $ 3 trillion.
“The trend is global, but the United States is a large part of the story in particular due to the annual deficit that is likely to reach $ 2 trillion on the road to 3 trillion dollars, and a possible erosion for the state of dollar reserves”, IP “, IP books.
The bond market dynamics are formed through several factors, including short -term interest rates for the federal reserve and the issuance of additional government bonds.
Also read: The Federal Reserve should do “nothing of all” about the emerging returns, says Craig Shapiro: “Let’s eat bonds.”
IP wrote that since October 2024, the term Premium, which represents the expected additional return from a 10 -year bond due to the detention of treasury bills for the same period, was up. This indicates that investors need higher returns for bond ownership.
The factors of the country also contribute to this situation. For example, the dull demand in Japan caused a 20 -year -old government bond auction for the global bond revolution for this week. Germany borrows more defense and infrastructure, while Britain is wrestling with constant inflation.
The financial situation in the United States is also subject to scrutiny. The federal deficit exceeded 6 % of GDP last year, and it is expected to exceed 7 % for a period of contract under the budget plan approved by Republicans in the House of Representatives earlier this week. This would set a record for the longest sustainable period in the history of the United States and almost all other advanced economies.
The Modi Classification decision last week is to deprive the United States of its tripartite-to-length classification of financial difficulties in the country. Investors are now considering reducing their assets in US dollars after two decades of fixed investment.
“Moody’s classification decision” last Friday to strip the United States from the last three times its debts told us that there is nothing that we did not already know. The United States is the wreckage of a financial train, which we also knew in 2023, Matthew Joe Biden He was president, as Fitch Ratses reduced the United States and did not touch the bond returns for 10 years by 5 %. “
Why do it matter: The current disturbances in the bond market and the increasing deficit of the United States have significant implications for the global financial scene.
The shift from the era of abundant savings and rare bonds to one of the high costs of borrowing of governments can reshape global financing dynamics.
Moreover, US financial challenges and a possible impact on the state of dollar reserves can have far -reaching effects on global investment patterns.
Read after that
Ray Dalio warns investors that they are “afraid” of the bond market, and the debts of America are called “very dangerous”
Photo: Shutterstock/Metamorworks
