Whatever the case, there likely won’t be much in the way of respite from the flattening in the near term. In other words, the transitory bout of steepening we saw on Thursday and Friday is likely to be just that – transitory. Here’s Bloomberg’s Brian Chappatta, from his week ahead preview (usually out on Sundays, always free, and always worth a read, by the way):

The U.S. will issue a combined $96 billion of two-, five- and seven-year notes this week, the largest slate of fixed-rate coupon sales since 2014, according to BMO Capital Markets. After a stretch dominated by Federal Reserve speakers, the offerings are likely to refocus traders on the prospect of ever-larger auctions to cover swelling budget gaps.

That outlook will be hammered home next week, when the Treasury releases its latest financing estimates for the current and upcoming quarters. With trillion-dollar deficits just around the corner, the department’s forecasts could very well be market-moving.

And this is where this discussion gets interesting if you step back and think ahead. I’ve talked a lot over the past six or so months about the dangers inherent in piling fiscal stimulus atop a late cycle economy (see here and here, for instance). There’s likely to be a sugar high for economic activity, but that comes at a cost; literally, in the sense that the current round of expansionary fiscal policy is deficit-funded.

As you’re probably aware, the latest CBO forecasts show the deficit hitting $1 trillion two years earlier than previously expected as a result of the tax cuts and extra spending measures.

The tax cuts and the spending are likely to juice the economy in the near term, but it’s doubtful they will pay for themselves via growth effects over the longer haul. According to the IMF, the U.S. fiscal position will be worse than that of Italy, Mozambique and Burundi by 2023:

Needless to say, the stimulus risks stoking inflation and thereby forcing the Fed to hike more aggressively than they otherwise might. Here’s an excerpt from a new piece by Brookings:

The U.S. economy remains in robust shape, with growth in GDP, industrial production, and investment holding up well. In tandem with strong consumer confidence and employment growth, wage and inflationary pressures have picked up slightly, although less than would be typical at this stage of the cycle. The U.S. is engaged in a perilous macroeconomic experiment, with the injection of a significant fiscal stimulus even as the economy appears to be operating at or above its potential. The Fed is likely to lean hard against potential inflationary pressures as this stimulus plays out. Export growth has been buoyed by a weak dollar and strong external demand, but the U.S. trade deficit has still risen over the past year.

As the Fed hikes to ward off inflation pressures, those hikes will of course drive short-end rates higher, thereby supporting the dollar and underpinning demand for the long-end (between favorable rate differentials and the safe haven appeal of U.S. debt, Treasurys will be an attractive asset even as the fiscal outlook for America worsens and even as the administration’s trade doctrine amounts to a weak dollar policy by proxy). This dynamic will lead to more flattening in the near to medium term.

 Related: Here’s How to Beat the May Market Blues