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Examining Treasury auction metrics across the curve reveals no signs of weakness in demand for US Treasuries at present. Bid-to-cover ratios are stable, and there is no evidence of auctions systematically tailing, see the first four charts below.
These charts, however, offer little comfort when considering the rising trend in debt-to-GDP, the increasing term premium, the falling dollar, and the $9 trillion that the US government needs to refinance over the next 12 months, see the following four charts below.
In particular, debt-servicing costs are rising rapidly, and the US government currently pays a record-high $3.3 billion in interest payments every day, and for every dollar the US government collects in tax revenue, about 20 cents go to paying interest on debt.
With debt levels growing much faster than GDP, the bottom line is that Treasury issuance will continue to grow faster than the economy, and the most likely outcome is that investors will demand compensation in the form of higher long-term interest rates.
In sum, there is upside pressure on short rates from higher oil prices, higher tariffs, and restrictions on immigration, and there is upside pressure on long rates because of fiscal challenges.
This is obviously very important for investors in both public and private markets.
Our updated chart book looking at demand and supply for US Treasuries is available here.
Sources: Bureau of Public Debt, Haver Analytics, Apollo Chief Economist 
Sources: US Department of Treasury, Macrobond, Apollo Chief Economist 
Sources: US Department of Treasury, Macrobond, Apollo Chief Economist 
Note: Bloomberg ticker USN10YTL Index. Sources: Bloomberg, Macrobond, Apollo Chief Economist 
Sources: US Congressional Budget Office (CBO), Macrobond, Apollo Chief Economist 
Note: The NY Fed measure for the term premium is based on a five-factor, no arbitrage structure model. Sources: Federal Reserve Bank of New York, Macrobond, Apollo Chief Economist 
Note: 1-year yield differential = 1-year German government bill minus 1-year US T-bill. pp = percentage points. Sources: Bloomberg, Macrobond, Apollo Chief Economist 
Sources: US Department of Treasury, Macrobond, Apollo Chief Economist 
Sources: US Treasury, Bloomberg, Macrobond, Apollo Chief Economist 
Sources: US Congressional Budget Office (CBO), Macrobond, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Our outlook for real assets for the second half of 2025 is available here.
Source: MBA, Apollo Chief Economist 
Source: RCA, Bloomberg, Macrobond, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Our outlook for private equity for the second half of 2025 is available here.
Note: The calculation takes 5-year annualized and 10-year annualized returns for every 5-and 10-year window with sample starting in 2000 to 2024 and averaging returns over time. Sources: Preqin, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Our chart book, available here, examines energy demand and supply, as well as the significance of the Strait of Hormuz.
Source: U.S. Energy Information Administration (EIA) analysis, based on Vortexa tanker tracking and Panama Canal, Apollo Chief Economist 
Source: U.S. Energy Information Administration (EIA) analysis based on Vortexa, Apollo Chief Economist 
Source: U.S. Energy Information Administration (EIA) analysis based on Vortexa, Apollo Chief Economist 
Source: Bloomberg, Macrobond, Apollo Chief Economist 
Source: Bloomberg, Macrobond, Apollo Chief Economist 
Data as of 2023. Source: U.S. Energy Information Administration (EIA) analysis based on Vortexa, Apollo Chief Economist 
See important disclaimers at the bottom of the page.
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Higher oil prices, higher tariffs, and restrictions on immigration are putting downward pressure on GDP growth and upward pressure on inflation. Lower GDP growth and higher inflation is the definition of stagflation.
The upward pressure on inflation is limiting how much the Fed can cut interest rates later this year. As a result, all-in yields will stay higher for longer, which will continue to support fixed income assets, including private credit.
We have published our consolidated views in my newest white paper, Mid-Year Outlook: At the Crossroads of Stagflation—What’s Next? You can download it here.
I will also be discussing the contents of the paper and my views in detail in an Apollo Academy class today at 11:00 ET (eligible for a CE credit). Register here. The class will be available on demand afterward.
See important disclaimers at the bottom of the page.
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The Census conducts a biweekly survey of 1.2 million firms, and one question is whether a business has used AI tools such as machine learning, natural language processing, virtual agents, or voice recognition to help produce goods or services in the past two weeks, see chart below. Nine percent of firms reported using AI, and the rising trend in AI adoption increases the likelihood of a rise in productivity over the coming quarters.
Note: AI adoption rate answers the question: In the last two weeks, did this business use Artificial Intelligence (AI) in producing goods or services? Examples of AI: machine learning, natural language processing, virtual agents, voice recognition, etc. Sources: US Census Bureau Business Trends and Outlook Survey, Apollo Chief Economist See important disclaimers at the bottom of the page.
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There are significant differences in student loan delinquency rates by state, see chart below.
Sources: New York Fed Consumer Credit Panel/Equifax, Apollo Chief Economist See important disclaimers at the bottom of the page.
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As we approach the Trump administration’s self-imposed 90-day deadline for trade deals, markets are starting to speculate about what comes next. The longer uncertainty remains elevated, the more negative its impact on the economy, as shown in the chart below.
Maybe the strategy is to maintain 30% tariffs on China and 10% tariffs on all other countries and then give all countries 12 months to lower non-tariff barriers and open up their economies to trade.
Extending the deadline one year would give countries and US domestic businesses time to adjust to the new world with permanently higher tariffs, and it would also result in an immediate decline in uncertainty, which would be positive for business planning, employment, and financial markets.
This would seem like a victory for the world and yet would produce $400 billion of annual revenue for US taxpayers. Trade partners will be happy with only 10% tariffs and US tax revenue will go up. Maybe the administration has outsmarted all of us.
Note: Impulse response from the VAR model with variables log (Real GDP) and log (Economic Policy Uncertainty Index). One standard deviation shock to Economic policy uncertainty leads to a 0.2% point decline in Real GDP. Temporary shock is defined as four standard deviation shock in Q1 and permanent shock is defined as four standard deviation in Q1, three standard deviation in Q2, two standard deviation in Q3 and one standard deviation in Q4. Sources: Bloomberg, Apollo Chief Economist See important disclaimers at the bottom of the page.
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To calculate CPI inflation, BLS teams collect about 90,000 price quotes every month covering 200 different item categories, and there are several hundred field collectors active across 75 urban areas.
When data is not available, BLS staff typically develop estimates for approximately 10% of the cells in the CPI calculation. However, in May, the share of data in the CPI that is estimated increased to 30%, see chart below.
In other words, a rising share of prices going into the CPI at the moment are guesses based on other data collections in the CPI.
Note: Different cell imputation is where uncollected prices are imputed from collected prices of the same item in other geographic areas or from collected prices of related item categories in the same geographic area. Sources: BLS, Apollo Chief Economist See important disclaimers at the bottom of the page.
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Active managers in public markets have largely not been able to beat their index, see here and here.
As a result, modern asset allocation is moving to a model where fixed income replacement plays a key role as generator of alpha in portfolios, see chart below.
Source: Apollo Chief Economist See important disclaimers at the bottom of the page.
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