There is a growing mismatch between the supply of government securities and the absorption capacity of investors. Our demand-supply assessment suggests $304 billion excess supply of US treasury consistent with US fiscal deficit at 6.15% of GDP. Interestingly, the corresponding mismatch was significantly lower, at around $140 billion in 2015, when the US fiscal deficit stood at just 2.5% of GDP. This widening gap highlights the growing pressure on the bond market to absorb additional government borrowing. The maturity-wise assessment further indicates that the excess supply is concentrated in longer-duration securities, with papers above 10 years accounting for approximately $108 billion of the mismatch, followed by the 1–5-year segment at around $96 billion, clearly reflecting the demand for hyperscalers. 

The US mid term elections could deliver a verdict in favour of Democrats. The Democrats as per historical trends follow a policy of fiscal prudence. Given this, if the US government undertake meaningful measures post November 9 to contain its borrowing requirements, US yields could potentially move towards 4.75% and even the Hormuz could finally reopen. Alternatively, fiscal consolidation through expenditure rationalisation and lower borrowing requirements could help moderate the pressure on yields but will impact US growth and of course Dollar Index will weaken subsequently. Presently, the 10-year yield stands at around 4.9%, Now for yield to sustain at 4.75% level, our estimates suggest that the US ought to reduce its borrowing/expenditure by approximately $100-120 bn. This is approximately 3% of the present borrowing level. Furthermore, in case of a more optimistic scenario for the yield has to further go down to 4.5%, the Fed must cut its borrowing/ expenditure by approx. $200 bn. 

It may be noted that the Republicans currently in power prefer a stronger Dollar Index and chase growth even if it means fiscal exuberance. Thus, the rupee will also have an appreciating bias with Dollar Index weakening post November 9th. In the unlikely scenario of no corrective steps being taken, US may head towards a deeper crisis with higher fiscal deficit and accumulated debt. 

A similar assessment for India indicates an excess supply of approximately Rs 1.52 lakh crore. However, unlike the US, the Indian government has already undertaken measures to manage its borrowing programme through bond switches and buybacks, which has brought down the gross borrowing requirement by Rs 1.23 lakh crores and could be cut further. The 10-year G-sec yield spread between India and US is currently hovering ~250 bps with the India’s yield at roughly 7.43% and the US yield at 4.93%. Past data (since 2019) indicate that the spread of 200-300 bps is the most possible scenario. In this regard, as per our calculation India’s 10-year G-sec yield could settle in the range of 6.75% 7% by end March’27. 

This is because of 2 reasons. First, 200-225 bps spread over US 4.75% yield. Second, historical analysis of the spread between Indian 10-year G-sec and Repo rate reveals that the most plausible situation is a 100-bps spread between the two. So, in case of a tightening monetary policy, even if the repo rate is increased by 50 bps to 6%, we believe that yield would still be in the range of 6.75% to 7% by March 2027 as per the historical analysis. However, a short-term flare up till 7.6% is not ruled out as may be certain section of market players in India have been caught off guard when the yields topped 7.15%-7.2% and hence now cutting their positions aiding in a yield spike. 

Beyond the sovereign bond market, the rapid expansion of AI infrastructure has been accompanied by a substantial increase in debt and off-balance-sheet commitments among major technology companies. The combined debt of the Magnificent Seven has increased to $578 billion by mid-2026, reflecting a rise of nearly 45%. Our estimates suggest that a rise in yields could translate into a potential market capitalisation loss of around $1.6–2 trillion for the Magnificent Seven in case the AI boom explodes! Furthermore, the Nasdaq Composite fell sharply on Friday losing 1.4% in a single day and about 3.4% since June in lieu of disappointing quarterly results from Amazon and Intel. Interestingly, Anthropic's entry into the public equity market, likely on Nov 12th with a target valuation between $1.5 trillion and $2 trillion serves as a high-stakes litmus test for the financial viability of the artificial intelligence boom. Nov 13th could thus be the deciding day in US equity markets and for global equity markets post the listing!