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

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ME News, on April 15 (UTC+8), the International Monetary Fund (IMF) warned on Wednesday that the continuous rise in U.S. Treasury issuance is eroding the safety premium it has traditionally enjoyed, pushing up global borrowing costs. Over the past three years, the U.S. budget deficit has averaged 6% of GDP—an unusually rare level—and is expected to remain at this level for the next decade. The IMF also said that the spread between AAA corporate bonds and Treasuries has narrowed, indicating a decline in the appeal of U.S. Treasuries. This spread has tightened from 55 basis points in early 2019 to about 35 basis points. In addition, the IMF warned that the U.S. Treasury Department is overly reliant on short-term debt issuance. U.S. Treasury Secretary Besent previously said that expanding long-term issuance is meaningless because long-term Treasury yields are higher than those of short-term bills. (Source: PANews)

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