Debt ceiling has been hit, prompting extraordinary measures by the Treasury
This article first appeared on SchiffGold.
The government hit the debt ceiling back in January and has been pursuing extraordinary measures since. This usually means dipping into things like Civil Service Retirement funds to free up cash and avoid borrowing any more money.
As the chart below shows, the debt balance has been pretty much net neutral for the last 3 months.
Note: Non-Marketable consists almost entirely of debt the government owes to itself (e.g., debt owed to Social Security or public retirement)
Figure 1: Month Over Month change in Debt
The debt ceiling will absolutely be raised and the government will go on borrowing way beyond its means. In the last 5 years, the borrowing has not been less than $1.8T. Expect more of the same this year once the ceiling is raised.
Figure 2: Year Over Year change in Debt
The Treasury has been able to maintain a somewhat healthy cash balance, currently sitting over $600B.
Figure 3: Treasury Cash Balance
The chart below shows both the maturity of the debt and average interest rate. Both have flattened out over the last several months as the Fed has kept rates largely unchanged and the Treasury is maintaining its average maturity.
Figure 4: Weighted Averages
The true danger facing the government is still in the massive interest currently being paid on the debt. It has risen to over $941B per year! This means that of the $2.2T in new debt in 2024, almost half of that was just for interest on the debt itself. That is a very dangerous position to be in.
Figure 5: Net Interest Expense
Using the current Fed dot plot and the rolling maturity of the debt, produces the forecast below. Again, the Treasury left “debt affordability” in the rearview mirror in 2021. The Treasury is now absolutely hemorrhaging cash on debt service costs.
Figure 6: Projected Net Interest Expense
Speaking of debt issuance and rollover, the chart below shows the forecasted debt maturing for 2-10 year maturities. Debt rolling over will be $600B higher in 2026 than it is forecasted to be in 2025.
Note “Net Change in Debt” is the difference between Debt Issued and Debt Matured. This means when positive it is part of Debt Issued and when negative it represents Debt Matured
Figure 7: Treasury Note Rollover
The yield curve has finally gone back to positive sloping between the 2 and 10 year. The Treasury was borrowing short-term the entire time it was inverted which seems like an odd decision.
Figure 8: Tracking Yield Curve Inversion
The chart and table below show how the debt and interest has changed over time.
Figure 9: Total Debt Outstanding
Category | # Years Ago | Bills | Notes | Bonds | Other | Total Mrkt | Nonmarketable |
|---|---|---|---|---|---|---|---|
Balance ($B) | 0 | 6,156 | 14,814 | 4,920 | 2,697 | 28,587 | 7,627 |
0.5 | 6,005 | 14,343 | 4,708 | 2,672 | 27,728 | 7,736 | |
1 | 6,063 | 13,863 | 4,467 | 2,558 | 26,952 | 7,635 | |
3 | 3,929 | 13,348 | 3,632 | 2,377 | 23,286 | 7,115 | |
20 | 1,059 | 2,227 | 537 | 281 | 4,104 | 3,673 | |
% of Total Balance | 0 | 17% | 40.9% | 13.6% | 7.4% | 78.9% | 21.1% |
0.5 | 16.9% | 40.4% | 13.3% | 7.5% | 78.1% | 21.8% | |
1 | 17.5% | 40.1% | 12.9% | 7.4% | 77.9% | 22.1% | |
3 | 12.9% | 43.9% | 11.9% | 7.8% | 76.5% | 23.4% | |
20 | 13.6% | 28.6% | 6.9% | 3.6% | 52.7% | 47.2% | |
Avg Interest Rate % | 0 | 4.31% | 2.96% | 3.26% | 0.65% | 3.08% | % |
0.5 | 5.02% | 2.72% | 3.2% | 0.62% | 3.1% | % | |
1 | 5.13% | 2.41% | 3.13% | 0.55% | 2.96% | % | |
3 | 0.24% | 1.41% | 3.02% | 0.35% | 1.35% | % | |
20 | 2.38% | 3.54% | 7.95% | 2.77% | 3.77% | % | |
Annualized Interest ($B) | 0 | 265.6 | 437.9 | 160.2 | 17.6 | 881.3 |
|
0.5 | 301.6 | 390.7 | 150.7 | 16.6 | 859.6 |
| |
1 | 310.8 | 334.0 | 139.7 | 14.1 | 798.6 |
| |
3 | 9.4 | 188.3 | 109.5 | 8.2 | 315.5 |
| |
20 | 25.3 | 78.9 | 42.7 | 7.8 | 154.6 |
| |
Avg Maturity (Yrs) | 0 | 0.19 | 3.42 | 20.78 | 5.82 | 5.94 |
|
0.5 | 0.19 | 3.43 | 20.91 | 5.80 | 5.93 |
| |
1 | 0.19 | 3.38 | 21.14 | 5.92 | 5.85 |
| |
3 | 0.22 | 3.51 | 21.83 | 5.82 | 6.05 |
| |
20 | 0.20 | 3.02 | 16.21 | 10.02 | 4.49 |
| |
Impact of .25% ($B) | 0 | 15.4 | 37.0 | 12.3 | 6.7 | 71.5 | 19.1 |
0.5 | 15.0 | 35.9 | 11.8 | 6.7 | 69.3 | 19.3 | |
1 | 15.2 | 34.7 | 11.2 | 6.4 | 67.4 | 19.1 | |
3 | 9.8 | 33.4 | 9.1 | 5.9 | 58.2 | 17.8 | |
20 | 2.6 | 5.6 | 1.3 | 0.7 | 10.3 | 9.2 | |
Bid to Cover Ratio | 0 | 3.03 | 2.57 | 2.52 | |||
0.5 | 2.91 | 2.56 | 2.47 | ||||
1 | 2.82 | 2.53 | 2.47 | ||||
3 | 3.11 | 2.55 | 2.58 | ||||
20 | |||||||
Data as of: Mar 2025 | |||||||
Many Fed officials and market pundits have called the current fiscal situation “unsustainable”. This is a gross understatement. The current fiscal situation is an absolute train wreck with no way out. It has been called a ticking time bomb for decades. That bomb has gone off as interest rate expense ballooned higher. It is worse than anyone could have imagined.
The debt ceiling will get raised. The borrowing will continue unabated and at some point, there will be a major debt crisis. This problem is no longer 10-20 years away. It is quickly becoming something that could happen at any point.