(Bloomberg) — U.S. Treasury bonds could face renewed selling pressure in the new year if the country’s rising debt repayment bill is any guide.
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Estimated annual interest payments on the U.S. national debt pile rose to more than $1 trillion at the end of last month, a Bloomberg analysis shows. This projected amount has doubled in the last 19 months compared to the corresponding figure projected at the time.
Estimated interest expense is calculated using U.S. Treasury Department data that shows the government’s monthly outstanding debt balances and average interest paid.
Of course, the measure of estimated interest costs is different from what the Treasury actually paid. Interest costs ultimately totaled $879.3 billion in the fiscal year ended Sept. 30, up from $717.6 billion a year earlier and about 14% of total expenses.
However, looking ahead, the rise in long-term government bond yields in recent months suggests the government will continue to face a rising interest bill.
The deteriorating metrics could reignite debate over the U.S. fiscal stance given Washington’s heavy borrowing. That dynamic has already helped push up bond yields, threatened the return of so-called bond vigilantes and led Fitch Ratings to downgrade U.S. Treasuries in August.
“Going forward, there will be further increases in Treasury coupon auctions and outstanding Treasury bills,” Bloomberg Intelligence strategists Ira Jersey and Will Hoffman wrote in a research note. “In addition to deficits of over $2 trillion in the foreseeable future, increasing maturities following the increase in emissions from March 2020 will also need to be refinanced.”
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(Updates to clarify interest cost calculation methodology.)
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