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

ME News report, April 15 (UTC+8). On Wednesday, the International Monetary Fund (IMF) warned that the continuing rise in U.S. Treasury issuance is eroding its traditionally “safe premium,” pushing up global borrowing costs. Over the past three years, the U.S. budget deficit has averaged 6% of GDP, a historically rare level, and is expected to remain at this level over the next decade. The IMF also said that the spread between AAA corporate bonds and Treasuries has narrowed, indicating that U.S. Treasuries are becoming less attractive. 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 reliant on issuing short-term debt. U.S. Treasury Secretary Beisante previously said that expanding long-term issuance is meaningless because long-term Treasury yields are higher than short-term bills. (Source: PANews)