Loading ...Democrats and Republicans have plenty at stake in the upcoming midterm elections. But it’s already looking like a no-win situation for the U.S. bond market.
If Democrats take the House, it raises the odds that congressional leaders will propose an infrastructure-spending bill similar in scope to President Donald Trump’s original trillion-dollar proposal. And if the GOP defies expectations and holds on in Congress, tax cut 2.0 becomes more likely. In either case, the result will be debt, debt and more debt.
That’d be on top of what is already a grim fiscal situation. A deluge of debt supply is set to inundate the $15.3 trillion Treasury market, just as borrowing costs rise. Not only is the U.S. budget deficit primed to swell to roughly $1 trillion by fiscal 2019 and past that in subsequent years, but the interest owed by the government is also forecast to triple in the coming decade to nearly a trillion dollars a year, according to the Congressional Budget Office.