Bank of America Global Research discusses the sustainability of rising government deficits and debts both in the US and globally.
"This is clearly a major concern among both institutional investors and our retail clients. Here we reiterate why we do not see a problem in the next five or 10 years and focus in particular on what happens if the Fed stops buying Federal debt," BofA notes.
"If the Fed were to stop buying bonds, we do not think it would be a drastic event. This is because bond yields are low due to several other important factors: low equilibrium real rates, a semi-permanent drop in inflation, little alternative to Treasuries for investors, and the US is the center of global capital markets," BofA adds.