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Bubble Alert: U.S. issuing bonds at pandemic rates

Bubble Alert: U.S. issuing bonds at pandemic rates

It is no secret that the COVID-19 pandemic took a significant toll on the global economy, even featuring 2 of the 10 worst days in the S&P 500’s history. 

The crisis also led to certain fiscal and monetary policies that are haunting many to this day with governments across the world injecting vast amounts of new currency into the system and taking on significant debt.

The U.S. has come, in particular, under fire for its pandemic-era choices as they are seen as some of the driving factors of the ongoing inflation crisis that had its hottest period in the summer of 2022 and which led to the still-high interest rates.

It is also considered a major contributor to the current national debt situation which has seen the burden surge to over $34 trillion, with the data retrieved from the Federal Reserve Bank of St. Louis indicating a sharp uptick between 2019 and 2020 – though the figures have been rising at a significantly accelerated pace since 1982 – shortly after the Reagan tax reform.

U.S. national debt multi-decade chart. Source: Federal Reserve Bank of St. Louis

For comparison, the debt rose from $21,516 to $22,719 between 2018 and 2019 and then surged to $26,945 in 2020.

U.S. taking debt at accelerated pace, issuing Treasuries at pandemic rates

The more recent trend has been increasingly worrying as the figures also show that, instead of a slowdown following the lockdowns, the U.S. government has been raising the pace of debt-taking.

Excluding the watershed year of 2020, between 2016 and 2019, the burden rose approximately $3 trillion while between 2021 and the first quarter of 2024, it surged by about $7 trillion with a particularly large jump taking place between 2022 and 2023.

With this in mind, it isn’t surprising to note that recent data shows that the U.S. Treasury has been issuing bonds, notes, and bills at the same rate as in 2020 with a clear trend for lowering the figure being visible by 2022 and for reheating it after.

The data retrieved from the Securities Industry and Financial Markets Association (SIFMA) reveals that the government has been issuing approximately $7 trillion worth of debt quarterly both in 2020 and in 2024.

Quarterly issuance of U.S. bonds, notes, and bills. Source: SIFMA

It is noteworthy, however, that the bulk of the treasuries represent short and mid-term debt with the actual quarterly surge in the burden recently estimated at $1 trillion every 90-100 days.

Still, if the current rate is maintained, the national debt will reach $57 trillion by 2030 and go beyond $60 trillion by the start of the next decade. If the current trend for year-over-year (YoY) debt-taking increase is applied using a simplistic formula, the figures turn into $63 trillion and almost $70 trillion respectively.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

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