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  • Writer's pictureEdward Ballsdon

US Debt Dynamics

Updated: Oct 6

(Published on 1 Sep 2023)



  • A catalogue of the rise in outstanding US government debt (UST)

  • The Treasury department carefully manages sudden UST debt increases through predictable actions

  • The increased size of outstanding UST makes the debt servicing cost more sensitive to interest rates

  • UST debt servicing at current interest rates is in line with historic costs, but there are other serious consequences from the enlarged debt load

  • UST demand trends have fluctuated post GFC

  • The Fed’s QE/QT programmes have significantly impacted (in a negative way for yields) the balance of UST supply and Domestic investor demand


  • The US government is running a fiscal deficit (leading to increased net UST supply) whilst the Fed is undertaking QT.

  • Domestic investors are having to purchase an increasing large amount of UST

  • The current environment is similar to the supply/demand dynamics of 2018, but on a larger scale (chart above)


  • Investors are receiving ever increasing real yields to absorb the higher supply of USTs

  • Given poor monetary growth, there is a risk of “crowding out” of private sector assets

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