Key Themes: We review current US federal debt dynamics, the ongoing fiscal deterioration (taking into account near-term vs long-term issues), focus on the ever increasing interest burden, the need for greater Treasury issuance, and put into context and compare the recent US rating downgrade vs other G10 nations.
Market Implications: We observe that whenever Treasury shifts the majority of the new growth in issuance to the notes program, the level of UST term premium rises and curves either steepen (or stay steep). More debt should steepen curves.
