When Does Higher U.S. Debt Start to Matter?

Andrew Sheets discusses when rising US debt and higher yields could become real market concerns. He argues private-sector balance sheets remain resilient and bond stress markers are calm, so the key channel is asset allocation, where Treasury and investment-grade corporate yields could eventually compete with equities. He also says rising US debt and Treasury intervention may weaken the dollar, especially against the Australian dollar. - US federal debt roughly doubled in the last 10 years. - Corporate and household balance sheets remain strong and less sensitive to higher rates. - Public-private balance-sheet divergence is global and reflects policy choices on taxes and borrowing. - US bond market stress markers such as inflation expectations and bond volatility remain low. - 30-year Treasury yields are about 3% above expected inflation and long-dated IG corporate bonds yield over 6%. - No clear equity-to-bond rotation is evident yet, and earnings are supporting equities. - Rising US debt and Treasury intervention may weaken the US dollar, especially versus the Australian dollar.