Treasury premium is slipping
The IMF warned that large U.S. debt issuance is eroding the extra yield Treasuries usually command, and some foreign sovereigns have been attracting haven flows instead. Bloomberg reports Singapore government bonds outperformed U.S. Treasuries recently, driven by local liquidity and haven demand. (financialpost.com) (bloomberg.com)
The International Monetary Fund said this week that heavy United States borrowing is weakening the yield edge that Treasury bonds usually enjoy. (imf.org) In its April 15 Fiscal Monitor, the International Monetary Fund said global public debt reached just under 94 percent of gross domestic product in 2025 and is on track to hit 100 percent by 2029, led largely by the world’s biggest economies. (imf.org) The United States Treasury said on February 3 that it expected to borrow $574 billion in privately held net marketable debt in January through March 2026, then another $109 billion in April through June. (home.treasury.gov) That supply matters because Treasury bonds are usually treated as the world’s default safe asset: a place investors accept slightly lower returns in exchange for liquidity, legal certainty, and a deep market. When Washington has to sell more debt, that pricing advantage can narrow. (imf.org) Investors have started to show that shift in actual trades. Bloomberg reported on April 15 that Singapore government bonds had outperformed United States Treasuries by the widest margin since 2007. (bloomberg.com) Bloomberg said the move was tied to falling local borrowing costs and haven demand, while Singapore’s central bank tightened policy on April 14 for the first time since 2022 and raised its 2026 inflation forecast to 1.5 percent to 2.5 percent. (bloomberg.com) (channelnewsasia.com) Singapore’s appeal is also fiscal. Bloomberg reported in December that investors were treating its sovereign bonds as an alternative to dollar assets because Singapore carries a triple-A rating and stronger government finances than the United States. (bloomberg.com) The Congressional Budget Office said on February 11 that the federal deficit will total $1.9 trillion in fiscal 2026, with debt held by the public at 101 percent of gross domestic product this year and 120 percent by 2036. (cbo.gov) The same office said net interest costs will rise from 3.3 percent of gross domestic product in 2026 to 4.6 percent in 2036, which means a larger share of federal spending will go to servicing old borrowing. (cbo.gov) Treasury bonds still sit at the center of global finance, and the United States still has the deepest government bond market. The warning from Washington’s own borrowing plans, the International Monetary Fund’s debt outlook, and Singapore’s recent rally is narrower: investors are demanding a little more compensation than they used to. (home.treasury.gov) (imf.org) (bloomberg.com)
