In our latest estimate, the U.S. Fiscal Forecast predicts that the interest cost on the U.S. government debt for fiscal year 2023 will be approximately $836 billion.
As of October 17, the U.S. government owed $31,211.4 billion. The estimated, weighted interest on this debt is 1.93 percent. This means that currently, the annual value of the interest on the U.S. debt equals $601.2 billion.
If the rise in auction-based median interest rates would continue on their current trajectory, the total interest cost for the U.S. debt would rise to $836 billion.
This forecast includes today's auction on 20-year U.S. Treasury bonds, which attracted $30 billion in tender. Of this, $12 billion was accepted, for a T/A of 2.5.
The median yield at the auction was 4.319 percent, a substantial rise from last month's 3.75 percent and 3/28 percent in August.
At 4.319 percent, the auctioned 20-year bond is slightly ahead of its latest secondary-market yield from yesterday, which landed at 4.27 percent. The 20-year is now the highest-yielding per auction, but not per secondary market: as of yesterday, the 1-year bill paid 4.5 percent, with the 2- and 3-year notes paying 4.43 percent.
The T/A ratio at the 20-year auction is comparable to the ratios from the past six months, with the exception of August, when the ratio landed at 2.15. The estimated, weighted average T/A for the entire U.S. debt is currently 2.43. We do not yet make trend predictions for the T/A ratio.
A review of T.A trends for the different Treasury maturity classes suggests that investors are moving from short- to long-term maturities. This trend is not strong, but suggests a stabilization, perhaps even downward pressure on long-term interest rates in coming weeks. By contrast, unless the Treasury retires short-term debt, those yields could rise more quickly than they are today. This would put the Treasury at risk for an inverted yield curve.
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