| Year | Debt Maturing (in Trillions) | Average Coupon Rate (%) | Estimated Refinancing Rate (%) | Interest Payments (in Trillions) |
|———–|——————————|————————–|——————————-|———————————-|
| 2023 | $0.8 | 2.50 | 5.00 | $0.04 |
| 2024 | $1.2 | 2.50 | 5.00 | $0.06 |
| 2025 | $10.0 | 2.50 | 5.00 | $0.50 |
| 2026 | $1.5 | 2.50 | 5.00 | $0.075 |
| 2027 | $1.0 | 2.50 | 5.00 | $0.05 |
The United States is staring down a massive financial crisis, with $10 trillion in government debt set to mature in 2025. This debt, with an average coupon rate of just 2.50%, is poised for a massive refinancing at a time when interest rates are above 5%. The result? A staggering increase in interest payments that could devour a significant portion of the federal budget.
The current economic climate, dominated by high interest rates due to the Federal Reserve’s battle against inflation, is creating a perfect storm. With U.S. Treasury securities now carrying an average interest rate exceeding 5%, refinancing this $10 trillion debt will come at a steep cost. Interest payments are set to skyrocket, potentially more than doubling from where they stand today. This shift in borrowing costs threatens to overwhelm the federal budget, leaving policymakers with tough choices ahead.
As the year of political hell comes to an end, investors must recognize that the USA will need to refinance more than $9.0 trillion of its debt in 2025, representing over 25% of the total US debt. This means that 2025 could be the year of the Great Wall of Debt. pic.twitter.com/nyhEe41AmF
— Laurent Lequeu (@LLequeu) December 26, 2024
Sources:
https://home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics
https://www.whitehouse.gov/wp-content/uploads/2024/03/ap_21_borrowing_fy2025.pdf
3 views