The Debt Structure in the US Continues to Swell…
The volume of dollar-denominated bonds on the balance sheets of US residents (national issuers) has reached $56.1 trillion, and with foreign issuers included, it totals $60 trillion, based on calculations using the Federal Reserve's Z1 data.
Over the past year, the debt has increased by $3 trillion (+5.6% year-on-year), compared to $2.4 trillion (+4.7% year-on-year) the previous year. This means that throughout the entire cycle of monetary tightening, debt has grown by $5.4 trillion, averaging over 5.2% annually, with treasuries accounting for exactly two-thirds of this increase.
This is a significant debt increment, as the average annual net increase in 2010-2019 was only $1.2 trillion per year, with about 72% of that going to treasuries. From 2017-2019, the debt grew by $1.5 trillion per year, with treasuries making up 60%.
In percentage terms, the average annual increase was 3.6% from 2010-2019 and 4% from 2017-2019. Thus, even in percentage terms, debt is growing 1.4-1.5 times more intensively, despite rising interest rates.
In the structure of debt growth over two years ($5.4 trillion), almost all (4.6 trillion or 85%) is due to treasuries ($3.6 trillion) and mortgage-backed securities (MBS) at just over $1 trillion.
Debt structure by outstanding balance:
- Corporate bills among national issuers – $1 trillion
- Treasuries – $26.8 trillion
- MBS – $12 trillion
- Municipal bonds – $4.1 trillion
- Corporate bonds – $12.3 trillion, with the non-financial sector at $7 trillion and the financial sector at $4.8 trillion.
MBS is derived from mortgage lending, and as mortgage lending slows, there will be a corresponding reaction in MBS, hence their growth has already been seen. The plan for treasuries is no less than $2 trillion per year, with escalation.
Regarding corporate debt, almost all debt growth occurred in the last year ($416 out of $608 billion), as in 2022 the market was paralyzed due to the interest rate shock and the shift of free liquidity into treasuries.
The cost of servicing the debt is growing exponentially, and this process is intensified as old debts are refinanced. Additionally, the system now requires at least $3 trillion of new debt for its functioning. Someone is bound to fail in this configuration.
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The volume of dollar-denominated bonds on the balance sheets of US residents (national issuers) has reached $56.1 trillion, and with foreign issuers included, it totals $60 trillion, based on calculations using the Federal Reserve's Z1 data.
Over the past year, the debt has increased by $3 trillion (+5.6% year-on-year), compared to $2.4 trillion (+4.7% year-on-year) the previous year. This means that throughout the entire cycle of monetary tightening, debt has grown by $5.4 trillion, averaging over 5.2% annually, with treasuries accounting for exactly two-thirds of this increase.
This is a significant debt increment, as the average annual net increase in 2010-2019 was only $1.2 trillion per year, with about 72% of that going to treasuries. From 2017-2019, the debt grew by $1.5 trillion per year, with treasuries making up 60%.
In percentage terms, the average annual increase was 3.6% from 2010-2019 and 4% from 2017-2019. Thus, even in percentage terms, debt is growing 1.4-1.5 times more intensively, despite rising interest rates.
In the structure of debt growth over two years ($5.4 trillion), almost all (4.6 trillion or 85%) is due to treasuries ($3.6 trillion) and mortgage-backed securities (MBS) at just over $1 trillion.
Debt structure by outstanding balance:
- Corporate bills among national issuers – $1 trillion
- Treasuries – $26.8 trillion
- MBS – $12 trillion
- Municipal bonds – $4.1 trillion
- Corporate bonds – $12.3 trillion, with the non-financial sector at $7 trillion and the financial sector at $4.8 trillion.
MBS is derived from mortgage lending, and as mortgage lending slows, there will be a corresponding reaction in MBS, hence their growth has already been seen. The plan for treasuries is no less than $2 trillion per year, with escalation.
Regarding corporate debt, almost all debt growth occurred in the last year ($416 out of $608 billion), as in 2022 the market was paralyzed due to the interest rate shock and the shift of free liquidity into treasuries.
The cost of servicing the debt is growing exponentially, and this process is intensified as old debts are refinanced. Additionally, the system now requires at least $3 trillion of new debt for its functioning. Someone is bound to fail in this configuration.
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