"The increase in the US Treasury security supply is compressing the safety premium that US Treasuries have traditionally commanded-an erosion that pushes up borrowing costs globally."
"In other words, Treasuries now offer a higher yield than the synthetic-dollar equivalents for hedged G10 sovereign bonds."
The U.S. faces a $2 trillion annual budget deficit, contributing to a $39 trillion national debt. This situation is diminishing the appeal of Treasury bonds, traditionally viewed as safe investments. Increased supply of Treasuries is compressing their safety premium, resulting in higher global borrowing costs. Demand for Treasuries has decreased, while interest in corporate debt has surged. The IMF noted that the convenience yield of Treasuries has turned negative, indicating a shift in investor preference towards other sovereign bonds.
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