The claim that the pieces of debt selling at record-high prices and carrying record-low face interest rates--which is the case right now for the death of credit-worthy sovereigns possessing exorbitant privilege--are in any sense a drag or a headwind seems to me to be simply wrongWell Brad, rates no longer price debt, lookie here, currency trading now prices debt! In the past two quarters, dollar holding earned about 14%. Italy? The have a one percent deflation rate, that adds some 1% to their nominal interest rates. The USA is now likely to suffer a long bout of deflation, raising our interest rates.
Are sovereigns likely to default? Well, they mostly default every 40 years, but we don't notice because they do it with monetary regime change. Most investors are wise to hold cash and have a better bargaining position when regime change comes to the central bankers. And it seems to be on its way, a bit faster than I expected.