The IMF warns that a surge in US Treasury issuance is eroding the safety premium and pushing up global borrowing costs.

PANews reported on April 15 that the International Monetary Fund (IMF) warned on Wednesday that the continued surge in U.S. Treasury issuance is eroding its traditionally safe-haven premium and pushing up global borrowing costs. The U.S. budget deficit has averaged 6% of GDP over the past three years, a historically rare level, and is expected to remain at that level for the next decade. The IMF also stated that the narrowing spread between AAA-rated corporate bonds and Treasury bonds indicates a decline in the attractiveness of U.S. Treasuries. This spread has shrunk from 55 basis points at the beginning of 2019 to approximately 35 basis points. Furthermore, the IMF warned that the U.S. Treasury is overly reliant on short-term debt issuance. U.S. Treasury Secretary Bessant previously stated that expanding long-term issuance makes no sense because long-term Treasury yields are higher than short-term notes.