August 26, 2026

Yesterday, Stanley Druckenmiller argued in the Wall Street Journal that the Treasury should stop trying to hold down long-end yields with buybacks and address the primary deficit instead. The fiscal backdrop to his argument is stark. Since 2006, US gross federal debt has increased by $32 trillion while the annual level of nominal GDP has increased by $19 trillion, see the first chart below. Debt is up nearly fivefold over that period. The economy is up less than 2.5x. Debt is compounding faster than the economy that has to service it, which is why federal debt held by the public has gone from below 40% of GDP to roughly 100% over that period. The outlook offers no relief. The CBO projects that under current policies, debt held by the public will keep climbing from 100% toward 175% of GDP, see the second chart below. The OMB forecasts budget deficits near 5% of GDP over the coming years, on top of a current run rate closer to 6%, see the third chart below. Deficits that size are normal in a recession. These are forecasts for a full-employment economy. The fiscal outlook, a Fed considering a rate hike, and hyperscaler issuance crowding out demand for Treasuries all point the same way. The bottom line for investors is that interest rates are going to stay higher for longer. Or, as Druckenmiller puts it, the long-term Treasury yield is the only fiscal disciplinarian the US has left.

August 25, 2026

The chart below shows US employment in each Federal Reserve district. San Francisco accounts for 20% of all jobs in the United States, and Atlanta 14%.

August 24, 2026

Average recoveries have dropped across the debt stack over the past three years, as out-of-court distressed exchanges reshuffled priority without real deleveraging and a growing share of asset-light software borrowers left creditors with little tangible collateral to seize, see chart below.