U.S. Debt Cost Bomb in One Table

On Thursday the Treasury sold $46.5 billion in 4-week bills. The auction attracted $144.9 billion in tender offers, which pushed the T/A down from last week's 3.37 to 3.12. The median yield also fell, from 3.9 percent in in the last two weeks to 3.646 percent. 

The 4-week bill is now close to the point where the newly auctioned batch of debt yields the same as the maturing batch. This week's maturing batch of $67.2 billion paid 3.53 percent. 

The other auction today sold $46.5 billion worth of 8-week bills. At $133.9 billion, investors tendered $2.88 per $1 of debt accepted (sold) by the Treasury. Unlike the 4-week, this meant a rising T/A over last week's 2.72. It is the highest T/A of any active 8-week batch. 

The yield on the 8-week came in at 3.91 percent, returning this maturity below 4 percent (4.05 last week, 4.08 the week before). The maturing batch of $52.2 billion yielded 3.4 percent.

As of December 8, the average yield on U.S. debt, by maturity, is as follows:

Table 1

Source of raw data: U.S.Treasury

Taken together, the two columns in Table 1 tell us that an estimated 49 percent of the debt, spanning maturities from two to seven years, currently costs the Treasury less than two percent per year. Assuming that market interest rates remain in the 4-percent vicinity for the foreseeable future, the rollover effect on rising debt costs will last for multiple fiscal years (as only part of the debt rolls over each year).

Currently, the estimated average interest rate on the U.S. debt is 2.14 percent. 

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We do not give investment advice. 

This blog provides analytical information solely for the purposes of 1) predicting the cost of the federal debt, and 2) for assessing the risk for a U.S. fiscal crisis. All information published here, forecasting and other, is based on publicly available data from the U.S. Treasury, including but not limited to approximately 65 percent of the current debt; on macroeconomic data, including but not limited to monetary policy decisions by the Federal Reserve; and on macroeconomic theory.