Fed Policy is Contributing to a Surge in Debt Payments

With the Fed holding rates at 23-year highs as part of its restrictive policy stance, the US Treasury has had to issue more debt to fund government expenditures.

The result?

$34 trillion of US Treasury outstanding debt.

Less well known is that multi-decade high rates and record Treasury issuance have pushed the total interest the US pays on its debt higher than the US national defense budget!

Runaway debt certainly will come up during the US election cycle, as well as during Congress’s next debt-ceiling debate.

What’s the takeaway for investors?

The higher the US’s coupon payments become, the greater barrier it presents to economic growth and stimulative government spending.

Source: State Street Global Advisors