Yellen’s short-term borrowing strategy triggers financial squeeze. Treasury faces $9.2 trillion debt rollover

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The United States is facing a massive debt rollover crisis, with $9.2 trillion in government debt set to mature in 2025. This accounts for nearly one-third of total U.S. debt, a staggering financial burden that will force the Treasury to refinance at significantly higher interest rates. The timing of this crisis is no accident. Former Treasury Secretary Janet Yellen prioritized short-term borrowing during her tenure, locking in low rates for only a few years instead of securing long-term stability. Now, the consequences are unfolding.

The numbers are alarming. Seventy percent of this debt—about $6.5 trillion—will mature between January and June 2025, creating immense pressure on bond markets. Much of this debt was borrowed at historically low interest rates, but with the average Treasury yield now at 3.2 percent, refinancing will be far more expensive. The government will be forced to issue massive amounts of new bonds, increasing Treasury supply and driving yields even higher.

This is not just bad policy—it is reckless financial management. Yellen’s decision to rely on short-term debt was widely criticized by economists who warned that rising interest rates would make refinancing unaffordable. Instead of locking in low rates for 10 or 30 years, she chose to issue debt in T-bills and two-year notes, leaving the country vulnerable to rate hikes. The result is a financial squeeze that could trigger a debt spiral.

The bond market is already reacting. Long-term Treasury yields have surged by nearly a full percentage point since September, reflecting investor concerns over ballooning government debt. The 10-year Treasury yield has climbed 115 basis points since the start of rate cuts, showing that markets are pricing in the risks of excessive borrowing.

The consequences extend beyond government finances. Higher Treasury yields mean higher mortgage rates, increased borrowing costs for businesses, and tighter credit conditions for consumers. The ripple effects will hit the housing market, corporate investment, and everyday Americans struggling with debt.

The new administration faces a difficult choice. Treasury Secretary Scott Bessent will need to extend debt maturities to prevent further instability, but doing so will push long-term interest rates even higher. The alternative—continuing short-term borrowing—risks deepening the crisis.

The debt problem is not new, but the scale of the 2025 refinancing challenge makes it impossible to ignore. The financial strain ahead will test the resilience of the U.S. economy, and the decisions made in the coming months will shape the country’s fiscal future.

SOURCES:

https://finbold.com/9-trillion-of-us-debt-will-mature-in-2025-should-investors-be-worried/

https://reason.com/2025/01/10/janet-yellens-short-term-thinking-could-cost-the-u-s-big/