US debt risks to become a 'fact of life' for investors, says Citi

A man is seen silhouetted wearing a protective face mask, amid the coronavirus disease (COVID-19) pandemic, walking near the financial district of New York City, U.S., October 18, 2021. REUTERS/Shannon Stapleton/File Photo Acquire Licensing Rights

NEW YORK, Nov 17 (Reuters) - Rising U.S. government debt and fiscal deficits that have helped lift government bond yields this year will likely become secondary factors for investors, as their focus shifts to economic fundamentals, Citi analysts said.

Concerns over increased government bond supply and larger fiscal deficits contributed to a surge in government bond yields - which move inversely to prices - to 16-year highs this year, while pushing rating agencies Fitch and Moody's to turn negative on U.S. government creditworthiness.

Even though those challenges are unlikely to recede, investors will eventually grow accustomed to the risks, partly because of lack of alternatives given the U.S. dollar's status of global reserve currency and the depth and liquidity of the U.S. government bond market, said Nathan Sheets, global chief economist at Citi.

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