Skip to content

U.S. Treasury debt set to hit all-time high this year 

U.S. Treasury debt set to hit all-time high this year 
Elmaz Sabovic

Analysts predict that the U.S. will need to address a substantial rise in its budget deficit through short-term borrowing, which could impact money markets and inflation control efforts. 

The Congressional Budget Office recently announced that financial aid for Ukraine and Israel will push the U.S. deficit to $1.9 trillion this fiscal year, up from the February estimate of $1.5 trillion, pushing the total debt to an all-time high of $6.2 trillion if the projections come true.

Projected U.S. economy deficit for 2024. Source: Congressional Budget Office
Projected U.S. economy deficit for 2024. Source: Congressional Budget Office

A shift to short-term debt might further disrupt money markets and hinder the Federal Reserve’s inflation control measures.

Over-reliance on short-term debt will test the U.S. markets

Part of the projected deficit increase stems from student loan forgiveness, which won’t immediately affect cash flow. 

Torsten Slok of Apollo noted that this surge could strain funding markets. The Treasury market has grown significantly since the financial crisis, indicating a reliance on debt financing. 

“It is likely that the share of Treasury bills as a share of total debt increases, which opens up the question of who is going to buy them; this absolutely could strain funding markets,” said Slok in his interview with Kate Duguid at the Financial Times on June 21.

However, relying more on short-term debt may test the market’s limits, especially as the Federal Reserve reduces its holdings of U.S. Treasury debt, shifting the balance between buyers and sellers.

Inflation and the U.S. treasury might make it hard to control the debt

The growing deficit has made it challenging for the U.S. Treasury to finance via long-term debt without increasing borrowing costs. Consequently, the Treasury has relied more on short-term debt, though this approach risks exceeding demand. 

Large-scale Treasury auctions have raised concerns among economists and analysts about who will purchase the available debt. 

While money market funds remain significant investors in Treasury bills, there are broader concerns about demand as the Federal Reserve, the largest U.S. Treasury debt holder, reduces its market presence. 

Best Crypto Exchange for Intermediate Traders and Investors

  • Invest in 70+ cryptocurrencies and 3,000+ other assets including stocks and precious metals.

  • 0% commission on stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit

  • Copy top-performing traders in real time, automatically.

  • eToro USA is registered with FINRA for securities trading.

30+ million Users
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk. eToro USA LLC does not offer CFDs, only real Crypto assets available. Don’t invest unless you’re prepared to lose all the money you invest.

Read Next:

Weekly Finance Digest

By subscribing you agree with Finbold T&C’s & Privacy Policy

Related posts

Disclaimer: The information on this website is for general informational and educational purposes only and does not constitute financial, legal, tax, or investment advice. This site does not make any financial promotions, and all content is strictly informational. By using this site, you agree to our full disclaimer and terms of use. For more information, please read our complete Global Disclaimer.