TS Lombard points out that while both the US and UK can alleviate long-term supply pressure by shortening debt maturities, their fiscal environments are completely different. The average maturity of UK government debt is approximately 14 years, and its fiscal policy leans towards consolidation with interest rates trending downwards; therefore, the refinancing risks associated with shortening maturities are relatively manageable.
The situation in the US is more precarious. The average debt maturity is already relatively short, fiscal policy remains expansionary, and there is significant future financing demand. TS Lombard also predicts that the Federal Reserve may need to raise interest rates more than the market currently prices in over the next 12 months. Continuing to shift financing to the short end will expose government interest payments to high policy rates more quickly.
Therefore, shortening maturities can temporarily alleviate pressure on the long-term market, but it increases the sensitivity of fiscal policy to short-term interest rates. As refinancing expands, the policymakers' room for maneuver between "lowering long-term bond yields" and "controlling interest payments" will become increasingly narrow.
