Borrow short

The US Treasury is entirely relying on short term bonds for the issuance of new debt. This is typical for periods of crisis like the financial crisis or the Covid pandemic. The US yield curve is still inverted with the 3 months yield at 5.32% and the 10 year bond yield at 4.24% We can think of different reasons of why the US Treasury accepts to pay higher interests on the short term bonds : a) there is a crisis currently with record budget deficits to be funded and government spending on the rise b) there is only investor’s appetite at the short end of the yield curve and c) the US Treasury is betting the longer interest rates will come down and it will be able to refinance at lower rates in the future. At ECP we remain at the shorter end of the yield curve as we still lack the visibility to significantly increase durations.