I know it is not immediate, but for some reasons, nobody has spoken about the sharp increase in US interest rates of the US Treasuries. On November 8, the yield of 10-year US Treasuries was 1.85%. Today, it is already at 2.25%. This increase of 0.40% applied to the level of $ 20 trillion of US public debt represents an annual cost to the budget of $ 80 billion.
This is a notional calculation since the debt will only become more expensive after each renewal of debt.
Who is selling US Treasuries?
The over selling of US Treasuries is the most severe since the crisis of 2007. It is a vote of non-confidence in the future of the United States credit.
As we all know, the largest holders of US Treasuries are central banks around the world (25%). They did not need to sell at the risk making a principal loss.
It was enough not to renew the short term Treasury bills and force the US Treasury to borrow at a higher rate.
The world will need to trust the United States
Whether he likes it or not, the US President-Elect has made some statements on the level of public debt. "I would borrow, knowing that if the economy crashed, you could make a deal," Trump said. "And if the economy was good, it was good. So therefore, you can't lose. i would renegotiate the debt"The Committee for a Responsible Federal Budget, a bipartisan fiscal watchdog had estimated that under Hillary Clinton, the debt would reach 29 trillion in ten years against 39 trillion for Donald Trump
Not just the interest: the infrastructure additional trillion.
The confirmation that, despite this precarious situation, the new administration intends to spend an additional $ 1 trillion in infrastructure costs increases the principal of the debt.
The debt ceilingg
The Republican Party has consistently threatened to close the Federal administration rather than increasing the debt ceiling. They did it from October 1 to 16, 2013, even though they had voted the expenses through the budget.
Will they make sure to limit the possible explosion of the US indebtedness? For some reasons, I have my doubts and it will be for the Democrats to block it.
Is the US rating threatened?
It is too early to know what the rating agencies will do with the US rating: Standard and Poor's recently reestablished the AAA rating? It will be critical for all parties involved to ensure that the creditworthiness of US Treasuries and the trust of investors in our country be maintained at the highest possible level.
The Fed has free rein..
After what just happened, an increase of the Fed rates will be made easier. What the carefulness of the central bank has hesitated to do was made overnight by an administration that has made promises that could create major financing, debt, budget and rating problems.
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