FROM: Lisa Sorani, Manager of HR Employee Services LS -
FROM: Lisa Sorani, Manager of HR Employee Services LS -
FROM: Lisa Sorani, Manager of HR Employee Services LS -
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POSSIBLE OUTCOMES: ALTERNATIVE SCENARIO 2<br />
r<br />
• While the US is in a far better situation than the countries in Southern Europe, some insights<br />
can be learned as the US enters a phase <strong>of</strong> increasing debt service cost<br />
• The dynamics <strong>of</strong> interest rates in Southern Europe and the outcomes on Fixed Income<br />
investments will provide valuable insights into the dynamics that could play out (likely with<br />
reduced severity) in the US<br />
• The chart below highlights just how quickly debt service costs can increase<br />
Debt =<br />
$16.8T<br />
Average<br />
Interest Rate<br />
Interest Cost<br />
($ Mil)<br />
% <strong>of</strong> Today’s<br />
Revenues<br />
Current 2.24% 376,498 15%<br />
3.00% 504,362 21%<br />
4.00% 672,483 28%<br />
20 Yr Avg 5.23% 879,302 36%<br />
6.00% 1,008,724 41%<br />
Pension Consulting Alliance, Inc. ││ EBMUD Fixed Income Discussion │ 36