Low Rates

Concern over the long-term outlook for the deficit hasn’t hurt the government’s ability to borrow more cheaply than it has in the past. Yields on 30-year Treasuries have averaged 3.4 percent this year, compared with 6.09 percent over the past three decades.

Joe Davis, chief economist at Vanguard Group Inc. in Valley Forge, Pennsylvania, said neither the low current deficit nor the longer-term outlook for bigger shortfalls have had a big impact on Treasuries because those are outweighed by other influences, including the Federal Reserve’s loose monetary policies and the strength of the U.S. relative to other economies.

The Fed has held its benchmark interest rate at zero to 0.25 percent since December 2008. Expectations have increased that the Fed will raise rates in the middle of 2015 just as investors worry about slowing growth and potential deflation in Europe, pushing the European Central Bank in the opposite direction to the Fed.

Strong Dollar

That has helped the dollar strengthen about 11 percent against the euro in the past six months.

“Clearly the level of debt matters for fixed-income investors,” said Davis, whose firm is the largest mutual fund manager with about $2.64 trillion in assets. “The U.S. has been for years a special case because it’s the international reserve currency. But that right is neither permanent nor pre- ordained.”

Economists cautioned against doling out any credit in Washington for the improving budget numbers, given that political leaders failed to reach any broad compromise over long-term spending issues. Disagreement between Republican and Democratic leaders led to a government shutdown in October 2013.

“I see nothing to celebrate that we’ve wasted five years and didn’t deal with the problem we know is coming,” said Douglas Holtz-Eakin, an economist and former director of the Congressional Budget Office who advised Republican candidate John McCain during the 2008 presidential election.