Recent policy developments in the United States, particularly those related to inflation and long-term debt sustainability, have brought significant implications for global fixed income markets. With the fiscal outlook becoming increasingly strained, it is an interesting moment to assess how markets are reacting and how investors should position themselves in the current environment.

The US government, like in many other countries, has a significant amount of debt outstanding. This debt is financed for the majority through the issuance of Treasury securities, which include Treasury bills (short-term), Treasury notes (medium-term), and Treasury bonds (long-term), and these securities serve as key instruments in financial markets. The investors include individuals, corporations, pension funds, the Federal Reserve, and other governments. Broadly, this is referred to the debt held by the public.

“Javier Milei’s dollarization and fiscal austerity proposals overlook the complexities of modern economies, ignore lessons from historical crises, and open the door for accentuating already severe inequalities.”