Record investment financing on 7000+ new data centers (and power generation to operate them) in the AI "arms race" to mutual destruction of the U.S. and Chinese economies, as trillion dollar tech firms are deathly afraid of "being left behind" in this winner-takes-all. in the private sector. Combine that with record debt financing by governments trying to stay afloat during tariff uncertainties and throw-them-out angry voters.
It’s a argument with a lot of circulation at the moment, however I have not seen any concrete evidence that it has had a *major impact on treasuries. The difference in risk, return, liquidity… attract very different investors and pools of capital. I imagine there is some effect on rates, however overall I don’t imagine they act like close substitutes.
Applying notions of default risk to sovereign debt in countries where the government has control over the supply of currency, and contracts are forced to nominally clear using that currency as a unit of account, is difficult. It is much more likely that when coming under strain from its interest burden, that the government resorts to inflation and financial repression. I think it’s fair to call that a de-facto partial default.
Record investment financing on 7000+ new data centers (and power generation to operate them) in the AI "arms race" to mutual destruction of the U.S. and Chinese economies, as trillion dollar tech firms are deathly afraid of "being left behind" in this winner-takes-all. in the private sector. Combine that with record debt financing by governments trying to stay afloat during tariff uncertainties and throw-them-out angry voters.
It’s a argument with a lot of circulation at the moment, however I have not seen any concrete evidence that it has had a *major impact on treasuries. The difference in risk, return, liquidity… attract very different investors and pools of capital. I imagine there is some effect on rates, however overall I don’t imagine they act like close substitutes.
I think the risk of the US defaulting on its debt must be part of why investors are demanding higher rates.
Applying notions of default risk to sovereign debt in countries where the government has control over the supply of currency, and contracts are forced to nominally clear using that currency as a unit of account, is difficult. It is much more likely that when coming under strain from its interest burden, that the government resorts to inflation and financial repression. I think it’s fair to call that a de-facto partial default.