Maybe debts and deficits now do matter?/Rig counts continue to fall/PMI's, pricing pressures bubble up again

With the eternal question of whether rising debts and deficits matter for interest rates and the funding costs a government has to pay, maybe we're getting a taste that now it does? The French 10 yr yield is up about 33 bps over the past 3 weeks ever since Marine Le Pen's National Party did well in the EU parliamentary elections that in turn triggered an early election in France where the party did well yesterday, though not as well as some feared (and why the euro is up, French stocks are rallying and the oat spread to bunds is narrowing a touch). The US 10 yr yield has risen to a 3 week high, maybe following Europe but also after the Presidential debate. 

Regardless of who wins in November though, we know the US financial situation is only going to get worse, especially if current federal spending as a % of GDP at 23-24% remains well above the historical trend of about 20%. While taxes will get a lot of focus too with the expiration of the Trump tax rate reductions, federal tax revenue as a % of GDP is currently in line with historical trends at about 17%. 

French 10 yr yield in orange/US 10 yr yield in white

French oat/German bund 10 yr yield spread

While we still have a month ish of economic data to see that will finalize how Q2 GDP did in the US (outside of future revisions), the Atlanta Fed on Friday moved its estimate to 2.2% from 2.7% and closer to my 1.5% ish GDP belief.