TS Lombard pointed out that although both the United States and the United Kingdom can alleviate long-term supply pressures by shortening debt maturities, their fiscal environments are different. The average maturity of UK government debt is about 14 years, and fiscal policy tends to be more consolidated with lower interest rates. The refinancing risks brought about by shortening the maturity are relatively controllable. The average debt maturity in the United States is relatively short, fiscal policy tends to be expansionary, and financing demand is high. TS Lombard expects the Federal Reserve to raise interest rates higher than market pricing in the next 12 months. The migration of financing to the short end exposes government interest expenditures to high policy interest rates, shortening the term increases the sensitivity of the government to short end interest rates, and narrows the space for policy makers to lower long-term bond yields and control interest expenditures.
