The debt ceiling doesn’t actually exist
This article first appeared on SchiffGold.
The government hit the debt ceiling back in January which blocked any net new debt from being created from January to June. Once the debt ceiling was lifted, the government wasted no time in catching up for all the months where borrowing was frozen. From July through October, the government borrowed an eye watering $1.8T!!
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 YTD total through 10 months now exceeds full year borrowing for all but 4 years. More than likely, the borrowing for November and December will bring 2025 borrowing to the third worst year ever and even possibly eclipsing the $2.6T borrowed in 2023 making it the worst year on record aside from the 2020 splurge of $4.5T.
Figure 2: Year Over Year change in Debt
The Treasury also wasted no time in reloading the cash balance, rising to a total of $1T.
Figure 3: Treasury Cash Balance
The chart below shows both the maturity of the debt and average interest rate. Bessent tried to un-do some of the mismanagement of Yellen who actively shortened the maturity of the debt. But those efforts have also reversed: see blue line with small recent peak in June followed by a quick collapse as tons of new short-term debt was issued. This was unavoidable as there is no way the market could ingest that volume of long-term debt in four months.
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 $970B per year! The debt breakdown and true federal interest from the budget has deviated slightly. This is likely from the debt ceiling standoff. It will take a few months to catch-up.
Figure 5: Net Interest Expense
Assuming the Fed drops a quarter point in December and waits until March to get back to the “neutral” rate, combined with the rolling maturity of the debt, we can forecast out the cost of the debt going forward. Again, the Treasury left “debt affordability” in the rearview mirror in 2021. The Treasury is now absolutely hemorrhaging cash on debt service costs, set to rise to $1.2T in 2027.
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 $600B higher in 2026 than it is forecasted to be in 2025.
Note “Net Change in Debt” is the difference between Debt Issued and Debt Matured. This means when positive it is part of Debt Issued and when negative it represents Debt Matured
Figure 7: Treasury Note Rollover
The yield curve has gone back to positive sloping between the 2 and 10 year. The Treasury was borrowing short-term the entire time it was inverted which seems like an odd decision. Bessent is now cleaning up that mess as noted earlier, but there is not really anything that can be done.
Figure 8: Tracking Yield Curve Inversion
The chart and table below show how the debt and interest has changed over time.
Figure 9: Total Debt Outstanding
Category | # Years Ago | Bills | Notes | Bonds | Other | Total Mrkt | Nonmarketable |
|---|---|---|---|---|---|---|---|
Balance ($B) | 0 | 6,593 | 15,506 | 5,173 | 2,727 | 29,999 | 8,042 |
0.5 | 6,060 | 14,908 | 4,958 | 2,650 | 28,576 | 7,638 | |
1 | 6,187 | 14,444 | 4,744 | 2,616 | 27,991 | 7,961 | |
3 | 3,666 | 13,734 | 3,904 | 2,439 | 23,744 | 7,495 | |
20 | 937 | 2,336 | 521 | 338 | 4,131 | 3,896 | |
% of Total Balance | 0 | 17.3% | 40.8% | 13.6% | 7.2% | 78.9% | 21.1% |
0.5 | 16.7% | 41.2% | 13.7% | 7.3% | 78.9% | 21.1% | |
1 | 17.2% | 40.2% | 13.2% | 7.3% | 77.9% | 22.1% | |
3 | 11.7% | 44% | 12.5% | 7.8% | 76% | 24% | |
20 | 11.7% | 29.1% | 6.5% | 4.2% | 51.5% | 48.5% | |
Avg Interest Rate % | 0 | 4.04% | 3.12% | 3.34% | 0.77% | 3.15% | % |
0.5 | 4.26% | 2.98% | 3.27% | 0.69% | 3.09% | % | |
1 | 4.88% | 2.76% | 3.21% | 0.65% | 3.11% | % | |
3 | 2.24% | 1.62% | 3.01% | 0.38% | 1.82% | % | |
20 | 3.37% | 3.72% | 7.86% | 2.59% | 4.07% | % | |
Annualized Interest ($B) | 0 | 266.3 | 483.6 | 172.9 | 21.0 | 943.8 |
|
0.5 | 258.5 | 444.7 | 162.1 | 18.2 | 883.5 |
| |
1 | 302.1 | 398.5 | 152.2 | 16.9 | 869.8 |
| |
3 | 82.1 | 223.0 | 117.4 | 9.2 | 431.6 |
| |
20 | 31.6 | 86.8 | 40.9 | 8.8 | 168.1 |
| |
Avg Maturity (Yrs) | 0 | 0.20 | 3.38 | 20.56 | 5.87 | 5.87 |
|
0.5 | 0.19 | 3.42 | 20.74 | 5.94 | 5.97 |
| |
1 | 0.21 | 3.42 | 20.86 | 5.91 | 5.90 |
| |
3 | 0.21 | 3.45 | 21.62 | 5.95 | 6.20 |
| |
20 | 0.20 | 2.95 | 16.10 | 9.41 | 4.51 |
| |
Impact of .25% ($B) | 0 | 16.5 | 38.8 | 12.9 | 6.8 | 75.0 | 20.1 |
0.5 | 15.2 | 37.3 | 12.4 | 6.6 | 71.4 | 19.1 | |
1 | 15.5 | 36.1 | 11.9 | 6.5 | 70.0 | 19.9 | |
3 | 9.2 | 34.3 | 9.8 | 6.1 | 59.4 | 18.7 | |
20 | 2.3 | 5.8 | 1.3 | 0.8 | 10.3 | 9.7 | |
Bid to Cover Ratio | 0 | 2.91 | 2.91 | ||||
0.5 | 2.9 | 2.56 | 2.5 | ||||
1 | 2.88 | 2.53 | 2.53 | ||||
3 | 2.62 | 2.5 | 2.43 | ||||
20 | |||||||
Data as of: Oct 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 was raised. Borrowing has continued 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.