Fiscal Stimulus Rate Pressure

"We will have entered the technical definition of a fiscal crisis when the interest rate on government debt exceeds the rate of our economic growth...the average interest rate on the total marketable debt outstanding is 3.443%. GDP grew by only 2.1% on an annualized basis in the first quarter of this year and a mere 1.5% in the quarter after that."

"If elevated borrowing requirements persist for years, higher yields could translate into significantly larger interest payments, further adding to the government's financing needs and potentially creating a feedback loop among deficits, debt issuance, and borrowing costs."

"It coincides with the very high level of government debt in many countries, particularly Japan, the U.S., France and the UK. Competition for capital from AI hyperscalers - the technology giants building huge data centres - combined with rising budget deficits"

"Kashkari stated "Corporate earnings are through the roof. They're doing great. The consumer is hanging in there. The labor market is hanging in there.""

"The Federal Reserve held its benchmark interest rate steady Wednesday, but left the door open to raising rates in the future if inflation remains elevated. Three regional Fed bank presidents dissented from the decision, preferring to raise interest rates by a quarter percentage point."

"Markets currently expect Fed officials to vote to raise rates in order to reduce inflationary pressures, according to CME FedWatch."

"Bianco suggests that if the Fed takes inflation seriously and "panics a little" by hiking rates next week, bond investors will calm down. Conversely, he warned that if the central bank rationalizes inflation and fights rate hikes, "the slow panic among bond investors could heat up.""

"Dimon warned that the US government's rising budget deficits will eventually create problems for the economy. He believes investors will demand higher returns to finance government borrowing, which could push interest rates even higher."

"Most economists continued to expect that the Federal Reserve would hike interest rates this year, despite job growth slowing considerably in June and revisions showing nonfarm payroll gains in the prior two months were not as strong as previously reported. The U.S. central bank last month left its benchmark overnight interest rate in the 3.50%-3.75% range, but updated quarterly projections showed policymakers expected to raise borrowing costs this year."

"Stocks got some help from easing Treasury yields in the bond market, which fell after a report from the U.S. government said employers added 57,000 jobs to their payrolls last month. Lower rates also tend to push upward on prices for stocks and other investments."