US still shows no signs of addressing debt mountain

Mixed messages from the Obama administration regarding the nation’s public debt burden indicate that any immediate commitment to address the deficit may have been sacrificed on the altar of economic growth. Credit looks at the US’s attempts to tread the fine line between ensuring economic stability and avoiding a hike in debt servicing costs.

Focus on growth, not debt: President Obama delivers the 2011 State of the Union address

Bond investors punished Europe’s weaker sovereigns and banks alike in 2010, but the US remained an enviable safe haven. Treasury yields were depressed for much of the year, while real GDP growth ran at 2.9%, according to the Bureau of Economic Analysis, well above the Eurozone’s 1.7% rate (as projected by Eurostat).

The US remains the largest bond market and the dollar the world’s reserve currency, while the actions of the Federal Reserve (in buying bonds) and the government (in extending tax