USA Bond Crisis

追加: 2026-05-12

[00:00:00]Hi, welcome back to the channel. In today's episode, I want to talk to you about what could be the biggest financial problem facing the United States right now, and that is the US bond market. Because the United States has a record amount of debt, the interest rate on US government bonds is still sitting at a very high level, and the cost of servicing that debt is now becoming one of the biggest items in the entire US federal budget. But before we get into the details on all of that, could I ask anybody that hasn't subscribed yet to please hit that subscriber button? Really does help me with the algorithm. Also puts a smile on my face. And if you'd like to support the channel further, please give this video a thumbs up and share it with anybody else who you think might be interested in what's happening in the global economy right now. Now, let's start off by taking a look at this chart. What this graph shows is the US 10-year Treasury note yield over the past 10 years. And the reason this chart is so important is because it tells you the cost of borrowing money for the United States government. If yields are low, America can borrow cheaply. If yields are high, borrowing becomes much more expensive. And as you can see from this chart, yields have increased dramatically over the past few years.

[00:01:12]For much of the period between 2017 and 2021, the 10-year Treasury yield was sitting somewhere between 1% and 3%.

[00:01:21]During COVID, it absolutely collapsed below 1%. At one point in 2020, it fell to around 0.6%.

[00:01:31]So, the US government could effectively borrow money for 10 years at almost no cost. But today, the yield is sitting around 4.4%.

[00:01:41]So compared with the ultra low rate era that America became used to, borrowing costs have effectively doubled, tripled, or in some cases increased by five or six times. And this is the key issue because if the United States only had a small amount of debt, higher yields would obviously matter, but they wouldn't be catastrophic. The problem is that the United States now has almost 39 trillion dollars of federal debt. 39 trillion. So even relatively small increases in interest rates now have enormous consequences for the federal budget. Now when people talk about a bond crisis, they often imagine some dramatic moment where investors suddenly stop buying government debt, yields explode, and the whole system freezes.

[00:02:29]But that's not necessarily how this works. Sometimes the crisis is much slower. Sometimes the crisis is simply that a government has borrowed so much money that even relatively normal interest rates start to become unaffordable and that's the situation the United States is now moving towards.

[00:02:47]The current yield on the US 10-year Treasury notes is around 4.4%.

[00:02:52]Now that might not sound extreme if you look back at the 70s or the 80s when interest rates were much higher. But compared with the last 10 to 15 years, this is a completely different world.

[00:03:04]After the global financial crisis and again after COVID, the United States got used to borrowing money at incredibly low rates. In July 2020, as I mentioned, the US 10-year yield fell to 0.6%.

[00:03:18]So, the US government could borrow money for 10 years at less than 1% interest.

[00:03:23]That was almost free money. But today, with the 10-year yield being at 4.4%, it's obviously significantly more. And the 30-year yield recently moved above 5%. And that completely changes the math because the United States is not dealing with a small amount of debt. It's dealing with $39 trillion. And out of that 39 trillion, more than 31 trillion is held by the public. And that debt is still rising very rapidly. Over the past 12 months, the US debt increased by $2.7 trillion. That works out at more than $7 billion every single day. So this is the first part of the problem. The United States is not just refinancing old debt at higher interest rates. It's also constantly issuing brand new debt. And that new debt is being issued into a much more expensive market. In the first quarter of 2026, the Treasury borrowed 577 billion in privately held net marketable debt. For the second quarter, it expects to borrow another 189 billion. And for the third quarter, the forecast is 671 billion. So, we're not talking about small numbers here. are talking about hundreds of billions of dollars every single quarter. And every time the treasury goes to the market, it has to pay whatever the market rate is. If investors want 4% or 4.5% or 5%, then that is the cost of the borrowing. And this is where the debt spiral risk really starts to appear. Because if the government borrows more money, the debt goes up. If the debt goes up, the interest bill goes up. If the interest bill goes up, the deficit gets worse.

[00:05:08]And if the deficit gets worse, the government has to borrow even more money. And that's the dangerous spiral.

[00:05:15]The second part of the problem is the refinancing wall. US treasuries are constantly maturing. Bills mature over weeks or months. Notes mature between 2 and 10 years. Bonds mature between 20 and 30 years. And according to the latest debt update, around 33% of publicly held marketable US debt is due to mature within the next 12 months.

[00:05:40]That is roughly 1/3 of the marketable debt stock on debt held by the public of around $31 trillion. That implies somewhere in the region of $10 trillion that needs to be rolled over within the next year. Now, not all of that debt is long-term debt. A lot of it is short-term Treasury bills. But the key point is that the United States has to keep coming back to the market. It has to keep refinancing. And if the old debt was issued when interest rates were very low and the new debt is issued when interest rates are much higher as they are today, then the cost goes up. And that's exactly what's happening. In April 2026, the average interest rate on total marketable US debt was 3.373%.

[00:06:24]5 years ago, it was 1.491%. 491%.

[00:06:28]So the average cost of the debt has more than doubled and it's still catching up because not all of the old cheap debt has matured yet. And that's the dangerous part from the US's point of view. The full cost of higher interest rates has not yet fed through into the US budget. Every month more low coupon debt matures. Every month that debt has to be replaced and every month the United States is locking in higher borrowing costs for the future. If the Treasury issues 10-year debt today at around 4.4%, it's not just paying that rate this year, it's going to pay it for the next 10 years. And if issues 30-year debt around 5%, it's locking that in for a generation, 30 years. That is why this matters so much, because higher interest rates don't just hurt today's budget, they create a bigger interest burden for years and years into the future. And we can already see this in the numbers. In 2025, the United States paid around $970 billion in interest costs. That's nearly a trillion dollars. Through the first six months of 2026, interest payments are expected to reach $519 billion. That made interest cost the second largest spending category in the federal budget, only behind social security. Let's just think about that. The United States is now spending more on interest than almost every other part of the government. More than defense, more than Medicare, more than Medicaid, more than many major public programs. And this is money that does not build roads. It does not fund schools. It does not improve hospitals. It does not strengthen the military. It simply pays the interest on money that's already been borrowed. The Congressional Budget Office expects the federal deficit to be around $1.9 trillion in 2026. It also expects federal debt held by the public to rise from around 101% of GDP in 26 to 120% of GDP by 2036. That would exceed the previous postwar peak after World War II. And the CBO says rising net interest costs are one of the main drivers of that increase. So this is not just a bond market issue. It's a budget issue, it's an economic issue, and it's a political issue. Because the more money the US government spends on interest, the less room it has for anything else.

[00:08:57]At some point, politicians face difficult choices. Do they cut spending?

[00:09:02]Do they raise taxes? Do they borrow even more? Or do they hope that inflation and economic growth reduce the real burden of the debt over time? None of those choices are easy. And that brings us to foreign buyers. For decades, one of the great strengths of the United States has been that the rest of the world wanted to own US treasuries. The dollar is the world's reserve currency. US treasuries are treated as the safest and most liquid asset in the global financial system. Central banks, pension funds, insurance companies, and foreign governments all hold them. But there are signs that this demand is becoming more complicated. Foreign holdings of US Treasury securities stood at around $9.5 trillion in February 26. Now that's an enormous figure. But the US market is an enormous market and the United States now needs buyers not just for the existing debt but for all the constant flow of new debt. China is especially interesting. China's holdings of US treasuries are around $693 billion in February 26. Now, that's down by more than $1.3 trillion at its peak in 2013.

[00:10:12]So, China's position has almost halved since its peak. That doesn't mean that China is dumping US treasuries overnight, but it does show long-term reduction in its exposure. And if China or Chinese corporates or other foreign institutions decide that they do not want to keep increasing their exposure to US dollar debt, then the Treasury has to find other buyers. Now, those buyers may still exist, but they may demand higher yields. And that's one of the problems. The USA does not just need to borrow, it needs to borrow cheaply.

[00:10:44]Because with debt of around $39 trillion, even small changes in interest rates make a huge difference. One percentage point on $30 trillion is $300 billion per year. That's the scale of what we're dealing with here. And the current geopolitical situation is making this more complicated. The war in Iran has pushed up oil prices and created renewed inflation concerns. Higher oil prices feed into inflation. Higher inflation makes it harder for the Federal Reserve to cut interest rates.

[00:11:17]And if investors believe inflation will stay higher for longer, they may demand higher yields on long-term treasuries.

[00:11:24]At the same time, the dollar has been supported by global uncertainty. That can make US assets more attractive as a safe haven, but it also makes dollar bonds more expensive for foreign buyers using other currencies. So, foreign investors face a difficult choice. On the one hand, US treasuries offer higher yields than they did a few years ago. On the other, there is currency risk, inflation risk, political risk, and debt sustainability risk. And that's why the bond market matters so much because treasury yields are not just a number on a screen. They affect mortgages. They affect corporate borrowing. They affect credit cards. They affect the stock market. And they affect the US dollar.

[00:12:07]And they affect the US's government ability to fund itself. If yields stay high, the US interest bill keeps rising.

[00:12:14]If the interest bill keeps rising, the deficit gets worse. If the deficit gets worse, the Treasury has to issue more debt. And if the Treasury issues more debt, investors may demand higher yields. And that's basically the loop.

[00:12:28]Now, to be balanced, the United States is not about to run out of money in the same way as a household or a company can run out of cash. It issues debt in its own currency. It has the world's reserved currency. It has the deepest bond market in the world, and there is still huge global demand for dollar assets. So, this is not a simple story of imminent collapse, but it is a story of rising pressure. The US has more debt than ever before. It's borrowing more every year. A large share of that debt has to be refinanced. The average interest rate on the debt is rising, and interest costs are now close to $1 trillion per year. That is the crisis.

[00:13:07]Not necessarily a sudden crash, but a slow, grinding deterioration in the federal finances. The danger is that the United States becomes trapped. It cannot easily cut rates because inflation remains at risk. It cannot easily reduce borrowing because the deficit is structural. It can't reduce debt because interest costs are rising. And it can't assume that foreign buyers will absorb unlimited amounts of Treasury debt at low yields forever. So the real question is this. At what point does the bond market say we still trust the United States but only at a much higher price?

[00:13:42]Because that is what a high yield really is. It is the market demanding more compensation, more compensation for inflation, for the increasing debt, for the uncertainty. And that higher price is now feeding directly into the US budget. So when people ask whether America is facing a bond crisis, I think the answer is this. It may not be a crisis in the sense of panic, but it is absolutely a crisis in terms of affordability. The United States can still borrow, but it's becoming much more expensive to do so. And when you owe nearly $39 trillion of debt, expensive borrowing becomes a very big problem very quickly. So, the US bond market is now one of the most important things to watch in the global economy because if yields keep rising, it's not just America that will feel it. It will affect global markets. It will affect currencies. It will affect banks. It will affect mortgages. It will affect stock markets and it will affect every country that relies on dollar-based financial system. So, I'll keep you posted on any further news and developments. But hopefully you've enjoyed today's video, found it useful, informative, and most importantly, thought-provoking. If you've liked what I've said, then please give me a thumbs up. Please subscribe to the channel if you haven't done so already. Don't forget, I'm currently running my competition where you can win my property. There is a very limited amount of time left on this now, and I'm offering some really exciting deals, the best deals ever. You get lots of free tickets if you buy one. So, um, have a look at the QR code on the screen now.

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