The U.S. budget deficit has stabilized from the COVID shock and is beginning to tick up again.  The budget shortfall is set to move higher, driven by interest payments on the national debt as the interest rates are now significantly higher, coupled with lower tax revenue as the economy slows. 

The supply and demand dynamics in the Treasury market have deteriorated with the Fed and foreign central banks, the largest buyers over the past few decades, now net sellers.  The structural pressure for Treasury yields is to move higher as the deficit increases. 

Zero Sum Game

The financial markets are now in a zero-sum game as the central banks curb their Treasury holdings. The fund flows to finance the trillion-dollar-plus U.S. budget shortfalls must come from other asset markets or absorb and divert a larger portion of savings otherwise directed to asset markets. 

Crowding out is the word.  Listen for it.