Fixed Income Research • Macro Strategy Lab
El-Erian Fiscal Supply Framework

Global Sovereign Bond Sell-Off & Duration Stress Simulator

Quantifying structural fiscal deficits, unanchored sovereign debt supply, sticky inflation floors, and term premium reconstitution across US Treasuries, German Bunds, UK Gilts, and Japanese JGBs.

Select Macro Shock Scenario (Mohamed El-Erian Thesis Presets) Scenario: Fiscal Supply Wave

Multi-Sovereign Yield Curve Benchmark

Baseline Curve
Stressed Yield Curve
10Y/30Y Issuance Shock Point
3M Cash
5.28%
+0 bps
2Y Short
4.62%
+0 bps
5Y Belly
4.28%
+0 bps
10Y Benchmark
4.45%
+45 bps
30Y Ultra-Long
4.75%
+75 bps

Shock Parameters & Curve Mechanics

+0 bps
-150 bps (Aggressive Easing) +300 bps (Severe Inflation)
Yield Curve Slope Twist Bear Steepener
+45 bps
0 bps (Suppressed) +150 bps (Severe Fiscal Premium)
1.5x
1.0x (Standard QT Runoff) 3.0x (Active Asset Selling)
2Y / 10Y Slope: -17 bps
10Y / 30Y Slope: +30 bps

Institutional Portfolio Duration Drawdown

Taylor Series Convexity Model
Estimated Price Return -3.84% Based on +55.2 bps effective duration yield shift
Capital Drawdown -$3.84M From $100.00M baseline AUM
Coupon Carry Buffer 12.3 Mos Time to absorb loss via annual coupon yield
Duration & Convexity Formula:
ΔP / P ≈ -ModDuration × (Δy) + 0.5 × Convexity × (Δy)2
Convexity cushion provides positive second-order defense as yield expansion accelerates.

El-Erian Macro Diagnostic

Real-Time Assessment
El-Erian's Core Supply Warning

"The global bond market sell-off is not over. Markets are realizing that supply indigestion, runaway sovereign deficits, and sticky services inflation mean the long end must reprice to attract non-central-bank buyers."

Under this Bear Steepener regime, the reconstitution of term premium is shifting yield pressure onto 10-year and 30-year paper. Institutional buyers are demanding higher risk compensation as Treasury and Gilt supply overwhelms private asset manager absorption capacity.
10Y Benchmark Stressed Yield 4.90%