The US government will borrow $550 bln in the October to December quarter and another $370 bln next quarter. The 2009 deficit is seen at a staggering $990 bln and 1.4 trln in borrowing. Welcome to the White House, Mr. President.
US yields are near record lows owing to the soft economy but many worry that this wave of government borrowing will push rates much higher and the dollar will weaken as a result. I don’t buy it. My feeling is that risk aversion will be alive and well throughout 2009 and the US will easily be able to sell its bonds to central banks who’ve been burned over the last two years “diversifying” their reserves.
