Robert Auwaerter, head of Vanguard's [profile] fixed-income group, estimated that the U.S. has four years to get its budget under control before the market drives borrowing rates up, reports Bloomberg.

Auwaerter said that the current high demand for U.S. debt reflects an absence of other attractive investments, not confidence in the government's finances.

"The U.S. Treasury gets a pass," he said, "in part because the liquidity in that market brings buyers in that would maybe not be there if there was a viable alternative."

Autwaerter wrote said that the U.S. has a "three- to five-year time frame" to control its spending before the market will "start to look at us like an Italy or Spain and start to assess a credit risk premium to U.S. Treasury yields." 

Edited by: HFD


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