Here’s why markets aren’t worried over the U.S. government’s mountain of debt – By Sunny Oh (Marketwatch) / Sept 11 2020
The U.S. federal government’s cost of borrowing is forecast to hit its lowest since World War II in 2025
The immense fiscal cost needed to limit the damage wrought by the COVID-19 pandemic isn’t frightening bond investors.
Even as the mountain of government debt has continue to pile up, the cost of borrowing for Washington is projected to fall to its lowest level in around 75 years and is likely to stay that way thanks to the Federal Reserve’s pledge to keep interest rates near zero.
The Congressional Budget Office forecasts U.S. public debt levels will eclipse the country’s annual economic output for the first time next year, but few are worried about this watershed moment.
“The cost of the debt for the Treasury will remain extremely low for the next decade. We are entering a new phase for public debt, in general,” said Bastien Drut, a senior strategist at CPR Asset Management, in an interview.
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