2023-09-10 09:34:00
US Treasury
America’s economy
Outstanding debt is one of the main reasons behind the upward pressure on interest rates. Why?
Dubai – Al Arabiya.net
Published on: September 10, 2023: 01:34 PM GST Last updated: September 10, 2023: 01:55 PM GST
Nearly a third of all outstanding U.S. government debt is due due in the next 12 months, according to an analysis by Apollo Asset Management.
A chart from chief economist Torsten Slok shows that the share of US public debt due within a year or less has risen steadily toward pandemic-era levels and is now at 31%. In dollar terms, this amounts to $7.6 trillion, the highest level seen since early 2021.
In addition, near-term public debt represents more than a quarter of US GDP. However, this is lower than its peak in 2020, when it accounted for a much larger share.
However, “Slok” said that the amount of $7.6 trillion owed is one of the sources of upward pressure on US interest rates, according to what “Insider” reported, and was reviewed by “Al Arabiya.net.”
This estimate comes at a time when the federal deficit has exploded in recent years, leading to a sharp rise in the trajectory of US debt. The Treasury Department has already sold $1 trillion in bonds just this quarter.
America’s debt
Meanwhile, borrowing costs have risen in the past year and a half as the Federal Reserve has embarked on an aggressive tightening campaign, raising the government’s debt servicing costs.
As of Friday followingnoon, the yield on the 10-year Treasury note was 4.25%, and the three-month yield was 5.47%.
Interest rates were also under pressure from the Federal Reserve’s quantitative tightening programme, which removed a major buyer from the bond market.
The central bank allowed regarding $1 trillion of its debt holdings to exit its balance sheet. Although yields have risen in recent months, the overall impact of monetary tightening on the market has been limited so far, with the Treasury finding a large number of buyers among money market funds and private traders.
But according to a paper conducted by the Federal Reserve Bank of St. Louis in late August, the participation of money market funds in recent Treasury bill auctions has begun to wane.
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