US Deficits Surpass Inflation as Primary Driver of Treasury Yields
US fiscal expansion has displaced inflation as the dominant force lifting Treasury yields. European fiscal restraint highlights the resulting asymmetry in borrowing costs. No primary US document signals near-term correction.
Former Dutch and German finance ministers told Chrystia Freeland that sustained US borrowing now sets global rate floors, a reversal from the post-2022 inflation narrative. Treasury data show net issuance of $2.3 trillion in marketable debt since January 2025, with foreign official buyers absorbing only 12 percent versus 28 percent in 2019. The pattern matches the 2018-2019 tax-cut cycle when US yields rose while euro-area yields fell despite synchronized global growth.
Treasury: net marketable issuance exceeds $2.4 trillion in FY2027 if primary deficit remains above 3.5 percent of GDP.
Sources (2)
- [1]US Treasury Monthly Statement of the Public Debt(https://fiscaldata.treasury.gov)
- [2]ECB Economic Bulletin Issue 5/2026(https://www.ecb.europa.eu/pub/economic-bulletin)