Interest payments on US debt were ~1% of GDP at 2% yields so yields at 3% should keep spending at ~1.5% of GDP
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- Thread starter bd popeye
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Bigger deficits -> more debt -> higher interest rates -> more debt spending -> repeat
12 months ago these ghouls were writing that China was in a Famine (remember those articles about Xi implementing no' wasting food')!!
I think it wasn't mentioned previously, but another important point here is when more people buy US bonds the yields (interest rate) goes down, so if the yield is shooting up that means no one wants to buy US debt. Now normally this is a good sign, showing the economy is doing great because it means people would rather invest their money else where (e.g. the stock market). However, right now the yield is shooting up while the stock market is not doing well, and there's a everything crisis coming.
Again, normally when people are scared there will be a economic down turn, they start buying US bonds because they are safe, but this time is different because people are not buying US debt.
Ah was a bit outdated, it was 1.5% of GDP so it should now be in the ~2.X range for interest payments.
The yield spread can mean many things with a broad set of causes. Technically, neither China’s government bonds or US treasuries can “default” in the classic sense because both country can “print”.
The current UST yields reflects US investors expectations of future FED rate hikes in order to fix the 4 decades high inflation in the US right now. The yield also has to do with an investors expected returns to account for inflation itself(i.e. if inflation is 5%, I need an interest rate of at least 6% assuming everything else is equal).
The central bank sanctions on Russia’s FX reserve have also impacted us dollar assets in central banks across the world. As Russia uses yuan more, demand for Chinese bonds will increase, lowering their Chinese bond yields, as well as from other central banks who also diversifying and adding more yuan holdings to their reserves. While the opposite is true for USD as people slowly sell US treasuries, lowering price and raising rates.
And also, let’s not forget that with China’s current covid lockdowns and outbreak, China’s central bank is likely going to keep yields low in order to support the economy, so it’s not all good news for China either.
Anyhow, sovereign bond yields have multiple causes that could explain the spread among different countries (it’s already complex enough looking at the rate curve convexity among different maturities within the same nation) and most of the time the underlying conditions have completely opposite ramification than what appears at the surface.
AssassinsMace
Lieutenant General
The West has most of the money so why don't the give it to the poor around the world...?
He isn't wrong. IK's multi-year delay of CPEC was quite damaging. It seems he is quite a politician though, he knows how to sweet-talk...
"Just IN: Newly elected PM Shehbaz Sharif says former PM Imran Khan damaged Pak-China relations.
"Just IN: Newly elected PM Shehbaz Sharif says former PM Imran Khan damaged Pak-China relations.
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I don’t follow the stuff in Pakistan or anything non-major globally but was there any reason why CPEC was delayed for so long?