Treasury Adds $2.2T of debt in 2024

The Government debt binge has slowed in the latest month, adding only $2B in new debt for January.

Note: Non-Marketable consists almost entirely of debt the government owes to itself (e.g., debt owed to Social Security or public retirement)

Figure: 1 Month Over Month change in Debt

The government still issued over $2.2T in new debt for all of 2024. This is not a record and was down YoY but it’s still an incredibly large number.

Figure: 2 Year Over Year change in Debt

For the last 12+ months, the Treasury has kept a fairly stable cash balance of $800B.

Figure: 3 Treasury Cash Balance

The chart below shows both the maturity of the debt and average interest rate. The interest rate has flattened in recent months, but the average years to maturity has dropped. This happened because of the massive issuance of short-term debt from the government which can be seen in figure 1 above.

Figure: 4 Weighted Averages

The true danger facing the government is still in the massive interest currently being paid on the debt. It has risen to over $900B per year! This means that of the $2.2T in new debt in 2024, almost half of that was just for interest on the debt itself. That is a very dangerous position to be in.

Figure: 5 Net Interest Expense

Using the current Fed dot plot and the rolling maturity of the debt, produces the forecast below. Again, the Treasury left “debt affordability” in the rearview mirror in 2021. The Treasury is now absolutely hemorrhaging cash on debt service costs.

Figure: 6 Projected Net Interest Expense

Speaking of debt issuance and rollover, the chart below shows the forecasted debt maturing for 2-10 year maturities. Debt rolling over will be $400B higher in 2025 than it was in 2024.

Note “Net Change in Debt” is the difference between Debt Issued and Debt Matured. This means when positive it is part of Debt Issued and when negative it represents Debt Matured

Figure: 7 Treasury Note Rollover

Yield Curve

The yield curve has finally gone back to positive sloping between the 2 and 10 year. The Treasury was borrowing short-term the entire time it was inverted which seems like an odd decision.

Figure: 8 Tracking Yield Curve Inversion

Historical Perspective

The chart and table below show how the debt and interest has changed over time.

Figure: 9 Total Debt Outstanding

Figure: 10 Debt Details over 20 years

Wrapping Up

Many Fed officials and market pundits have called the current fiscal situation “unsustainable”. This is a gross understatement. The current fiscal situation is an absolute train wreck with no way out. It has been called a ticking time bomb for decades. That bomb has gone off as interest rate expense ballooned higher. It is worse than anyone could have imagined.

The Fed is lowering rates again even though by any measure of inflation it should be holding steady or even raising rates. Unfortunately, the Fed no longer has a choice. With the government paying nearly a trillion dollars a year just on interest, rates have to come down or else the debt death spiral will begin in earnest.