US Treasury securities, with more than $33 trillion outstanding, comprise the world’s largest government bond market. Yields on those securities serve as benchmarks for interest rates around the world, setting the baseline for the cost of borrowing for everything from dollar-denominated borrowing by non-US governments to corporate debt. So, if the Treasury market is in trouble, its effects can ripple throughout the international debt markets and, therefore, the entire world economy.
How Treasury rates affect other rates
Since US public debt is widely regarded as a “risk-free” asset, it is taken as a baseline for pricing other, riskier debt investments.
Pricing of newly issued corporate bonds is usually expressed as a premium to US Treasuries. For example, if you are a BBB-rated US corporation, you currently would need to pay 1.6 percentage points more than the…
