Deficit trajectory remains unsustainable and is directly pressuring rates higher. Current annual interest expense: ~$1.5T, nearly 50% of total tax receipts. This is a structural problem with no near-term fix.
Inflation floor appears sticky at 3%+. Market pricing in higher-for-longer is correct. Real yields compressed, but nominal rates aren't coming down materially without fiscal discipline—which isn't happening.
Risk: If deficit spending accelerates further while rates stay elevated, debt service crowds out discretionary spending and amplifies refinancing risk for corporates. Watch duration exposure and fiscal-sensitive sectors (financials, utilities, REITs). $TLT remains a fade until fiscal policy shifts.
Inflation floor appears sticky at 3%+. Market pricing in higher-for-longer is correct. Real yields compressed, but nominal rates aren't coming down materially without fiscal discipline—which isn't happening.
Risk: If deficit spending accelerates further while rates stay elevated, debt service crowds out discretionary spending and amplifies refinancing risk for corporates. Watch duration exposure and fiscal-sensitive sectors (financials, utilities, REITs). $TLT remains a fade until fiscal policy shifts.