The Fed is screwed The Treasury’s total marketable debt is around $28 trillion, with roughly 20-25% maturing annually (based on typical debt profiles), about $5.6 to $7 trillion matures in 2025. Who wants to own U.S. govt 30 year debt at 4.8% yield????? https://x.com/PeterLBrandt/status/1910715147972141295
This is a big hairly problem. Peter is spot on: who wants to own US 30Y at 5%? But Be Careful What You Ask For... Geoffrey warns: the 10Y rising from 4.5% into 6% puts interest on US govt debt to revenues >130% which will trigger US govt default https://x.com/SamanthaLaDuc/status/1910809628226847164
...the tariff threat is a sideshow.
...the main issue is this humongous US debt maturing later this year, which needs re-financing
...and Trump 2.0 attempts to 'engineer' a shock and awe meltdown to crash US 10year yields has backfired big time, causing it (10 year yield) to rise instead.
...and with the Govt in retreat, the bond vigilantes smell blood.
...Trump's tariffs will push inflation higher, the Fed to pause rate cuts for longer in view of higher inflation, while anyone subscribing to new US Treasury issuance will be demanding a higher risk premium (higher yield to compensate for higher perceived risks). And what happens when there is no demand for the upcoming supply because there is no confidence?
...Trump is trapped by his own doing. America may end up having to pay a higher than 5% interest on new US Treasuries to replace maturing ones. With DOGE only delivering just $150B in savings and tariff revenues possibly ending up rather immaterial, the higher yields on maturing re-financed debts would probably offset all the savings (a 1% increase in yields equates to $340B in extra interest expense), leaving little to no room for any material tax cuts without widening US budget deficits further.
...So despite well intended efforts but a failed execution at that, tax cuts are almost a certainty and therefore widening deficits combined with high debt maturities leave the US susceptible to a 'Liz Truss' style bond crisis in the near future, something which our Paul Keating has also alluded to.
...Which begs the question if Trump 2.0 would proceed with the Miran proposal to swap maturing US Treasuries with a zero coupon gold backed bond instead but questionable if they would be able to compel holders to accept them without further transactional coercions. More transactional coercions would further result in a more rapid global de-dollarisation.
