The Compound and Friends · Monday, July 13, 2026
Nick Colas points to increased US government spending as a significant driver of incremental baseline demand, with deficits to GDP now at 6%, compared to 3% historically. However, he notes this increase in government spending has not impacted interest rates, with ten-year yields remaining similar to levels seen in the early 2000s.
“US government spending has created a lot of incremental baseline demand. Deficits to the GDP run at 6% now. They ran at 3% from 1979 to 2010. So we have more government spending providing a base load for the US economy.”
“I would however add, this has had no effect on interest rates. Ten year yields right now are the same as they were in 2002, 2003, 2004, when deficits were 60% of GDP or budgeting, you know, the entire debt load was 60% of GDP versus 122% now.”