The US government’s massive and growing national debt is raising concerns in financial markets. Two key factors are driving this worry:
Rising Interest Rates: Higher interest rates make it more expensive for the US to borrow money, increasing debt servicing costs.
Shifting Perceptions: Traditionally, US treasury bonds were seen as a safe haven asset. Now, with higher yields, there’s uncertainty about their reliability.
This isn’t a new issue, but the current environment has amplified it. As you’ll hear in this week’s episode of “Not the Daily News,” Anton Eser and Michael Avery delve deeper into this situation. They discuss how rising interest rates and a fundamental shift in investor perception are creating significant market anxiety.
Here are the key takeaways from their discussion:
- US Debt & Interest Rates: The US has a large and growing fiscal deficit, leading to higher debt. Rising interest rates make it expensive to service this debt.
- Treasury Market & Risk: The US Treasury market is crucial because it sets the standard for borrowing costs across all assets. Uncertainty surrounds treasuries’ role as a safe haven asset due to higher yields.
- Investment Strategies: In an environment of high yields and potentially declining equity prices, some potential havens include cash, Treasury Inflation-Protected Securities (TIPS), and possibly gold.
Listen to the full episode below:
