StoneX’s Kathryn Rooney Vera: U.S. Debt Burden Looms Large in 2024 Election

Key takeaways:

• Long-term Treasury yields could face upward pressure due to large debt issuance in the coming years
• Vera is preparing for a steeper yield curve, anticipating that significant issuance will weigh on long-dated Treasuries
• Spending cuts are seen as the solution to curbing deficits, but neither political party seems prepared to take such measures

As the 2024 U.S. presidential election approaches, concerns are mounting over the nation's growing debt burden and its potential impact on Treasury markets. Analysts predict federal debt could swell by $21 trillion to reach $48 trillion by 2034. Meanwhile, demand for U.S. government bonds from foreign investors and the Federal Reserve has not kept pace with the expanding market size.

Kathryn Rooney Vera, chief market strategist at StoneX, shared her insights on the fiscal challenges facing the next administration in a recent Reuters article, noting, "the answer is reducing spending, and neither side wants to do that."

While an abrupt drop in demand for U.S. government debt is considered unlikely given the dollar's reserve currency status and the Treasury market's depth, investors are beginning to adjust their strategies. Some are favoring shorter-term maturities or reducing exposure to longer-duration Treasuries to mitigate potential losses should yields surge.

As the election draws near, fiscal concerns are expected to take center stage alongside monetary policy debates. Market participants will be closely monitoring the candidates' proposed policies and their potential implications for the U.S. debt trajectory.

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