The US Refinance Risk: Why Are We So Concerned?

The US two-year treasury yield is up about 4.5% now compared to 1% of the start of the year. We're forecasting the Fed funds rate to come in at about 4% next year. The other factor is, of course, spread. Now, we've seen a big widening at the bottom end of the rating bucket as financial conditions tighten. And then you add to that the shock from COVID, the impact that had on pushing up global debt burdens, including for non-financial corporates and clearly we're in a position that is in many ways much more vulnerable than it was during previous cycles.