In case you’re wondering, total interest in the Fiscal Year that just ended last Friday is an unbelievable $706 BILLION. If rates keep rising, annual interest payments could increase to nearly $2 trillion. At the start of the Fiscal Year back on October 1, 2021, the national debt was $28.4 trillion. So over the course of the past twelve months, the debt increased by a whopping $2.5 trillion. That’s the second highest annual increase in the US national debt EVER, after the $4.2 trillion increase in the 2019-2020 Fiscal Year during the pandemic. Treasury securities are issued with specific maturities; similar to how a bank could issue a mortgage with a 30-year, 20-year, or 15-year term, the government issues bonds with varying maturities, ranging from 4 weeks all the way up to 30 years. And once the bond matures, whether that be after 4 weeks or 30 years, it needs to be repaid. This is the worrisome part.
Because out of all the bonds that the US government has issued, the weighted average maturity is about FIVE years. This is a REALLY short average maturity for government bonds. To put this in context, the average maturity for Japanese government bonds is more than 9 years. For German government bonds it’s more than 13 years. In the UK it’s about 15 years. But, again, in the US, it’s just 5 years. And this means that, every year, approximately 20% (one-fifth) of US government bonds will mature and need to be repaid. by Simon Black
Poster Comment:
$706 BILLION annual interest payments on a fictional debt.