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As the United States faces a substantial economic challenge, approximately $7.6 trillion of interest-bearing public debt is set to mature within the next 12 months, constituting 31% of all outstanding US government debt. This revelation, shared by Apollo’s Chief Economist Torsten Sløk, highlights a significant source of upward pressure on US interest rates.
The chart presented in September illustrates a steady increase in the share of US public debt with a maturity of one year or less, reaching levels reminiscent of the pandemic era. The current 31% share represents a dollar amount not seen since early 2021, contributing to the overall pressure on US rates.
While the maturation of nearly a third of outstanding US government debt within a year is a substantial figure, it is essential to note that this percentage is still below the peak observed in 2020, signifying a complex economic landscape.
This estimate aligns with the backdrop of explosive federal deficits in recent years, altering the trajectory of US debt. The Treasury Department’s auction of $1 trillion in bonds within the third quarter further underscores the magnitude of the economic challenges.
Looking ahead, the percentage of US debt maturing in the near term could continue to rise, especially considering the Treasury’s recent decision to rely more on T-bills issuance and slow the sale of longer-dated bonds, as outlined in the quarterly refunding statement issued in early November.
The surge in debt issuance has faced challenges, with weak demand noted in recent auctions. Additionally, borrowing costs have experienced a notable increase amid the Federal Reserve’s aggressive tightening campaign over the past year and a half. Although these costs have come down in November, they remain elevated compared to the previous year.
The intricate interplay between maturing debt, fiscal policy, and market dynamics presents a multifaceted economic landscape, prompting a close examination of the upcoming challenges and potential implications for interest rates and financial markets.
