The bond market is under pressure as investors react to rising government deficits and persistent inflation, with fiscal profligacy becoming a central concern. From the UK to the US, expansionary fiscal policies are raising alarms about debt sustainability, leading to increased yields as investors demand higher risk premiums. The US Congressional Budget Office projects net interest costs will rise to 3% of GDP amid a 7% fiscal deficit, highlighting the Treasury's growing financing challenges. This environment has created a dichotomy in sovereign debt markets, with countries like Australia and Canada, which maintain more sustainable fiscal paths, seeing stronger bond market performance.
The iShares 20+ Year Treasury Bond ETF (TLT), which focuses on long-term US Treasury bonds, is reflecting these broader market concerns. As of 23:30 on January 9, TLT is priced at $85.95, slightly above its last close of $85.92, but still near its 52-week low of $85.34. The ETF's performance underscores the impact of fiscal and inflationary pressures on US Treasury yields, as investors navigate the challenges posed by fiscal instability and rising interest burdens.