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Debt Deluge: Sovereign Issuance & AI Capex Rate Workbench

1. ISSUANCE & SUPPLY DRIVERS INPUTS
MACRO SCENARIO PRESETS
US Net Treasury Issuance $2,000 B/yr
$800B (Muted Deficit) $3,500B (Severe Deficit)
Mega-Cap AI Infrastructure Debt $300 B/yr
$0B (Traditional Capex) $750B (AI Buildout Frenzy)
Global Reserve & Private Demand $1,100 B/yr
$400B (Buyer Strike) $2,200B (High Inflows)
Duration & Term Premium +45 bps
-30 bps (Inversion Anchor) +150 bps (Fiscal Spike)
Crowding-Out Mechanism: When Washington issues trillions in sovereign paper while hyperscalers (NVIDIA/Microsoft/Google/Amazon ecosystems) issue hundreds of billions in corporate paper for GPU clusters & power plants, bond markets suffer supply indigestion, lifting yields across the curve.
2. BENCHMARK US TREASURY TERM STRUCTURE CURVE DYNAMICS
10Y Benchmark 4.68% +48 bps vs base
30Y Long Bond 4.92% +52 bps vs base
Net Debt Indigestion +$1,200B Supply Overhang
YIELD CURVE (BASELINE vs SIMULATED)
Base (3.95% 10Y)
Simulated Deluge
YIELD PRESSURE TRANSMISSION WATERFALL (10-YEAR PASS-THROUGH)
Baseline 10Y Base
4.20%
+ Sovereign Supply
+28 bps
+ AI Capex Debt Crowding
+14 bps
+ Term Premium Delta
+10 bps
Simulated 10Y Yield
4.72%
3. CONSUMER IMPACT & DEBT SERVICE PASS-THROUGH
Median Household Monthly Debt Service Extra Penalty
+$284 / mo
Equates to +$3,408 per year in additional borrowing tax due to market rate crowding.
Lending Vehicle Base Rate Simulated Mo. Impact
30Y Fixed Mortgage
$420k Median Loan 		6.65% 7.18% +$148/mo
5Y New Auto Loan
$38k Financed 		7.80% 8.22% +$39/mo
Credit Card APR
$8.5k Revolving Bal 		21.50% 22.05% +$97/mo
TRANSMISSION ELASTICITIES
Mortgage Spread (10Y Pass-Through): ~108 bps pass-through elasticity. Mortgage rates follow 10Y yields plus the primary-secondary mortgage-backed security (MBS) spread.
Corporate Crowding Effect: As hyper-scalers flood high-grade corporate bond channels, corporate credit risk spreads widen, raising base loan benchmarks for private lenders.
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