IMF warns: Surge in U.S. debt issuance weakens safe haven premiums, driving up global borrowing costs

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ME News message: On April 15 (UTC+8), the International Monetary Fund (IMF) warned on Wednesday that the continuous rise in U.S. Treasury issuance is eroding its traditionally “safe” premium and driving up global borrowing costs. Over the past three years, the U.S. budget deficit has averaged 6% of GDP—an unusually rare level in history—and it is expected to remain at this level over the next decade. The IMF also said that the spread between AAA-rated corporate bonds and Treasuries has narrowed, indicating a decline in the attractiveness of U.S. Treasuries. The spread has fallen from 55 basis points at the beginning of 2019 to about 35 basis points. In addition, the IMF warned that the U.S. Treasury Department is overly dependent on issuing short-term debt. U.S. Treasury Secretary Bessent previously said that expanding long-term issuance is meaningless because long-term Treasury yields are higher than short-term bills. (Source: PANews)

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