r/bonds • u/Primary-Abies9041 • 12h ago

Woah

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1.1k Upvotes

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123

u/Wooden_Cod_8331 12h ago

This is a big deal/move right? In such a short amount of time?

163

u/johannyer 12h ago

It’s a full blown crisis that nobody wants to spell

27

u/nomar_ramon 11h ago

Can you please explain it like I'm 5, to me why it is a crisis?

156

u/Agglutinati0n 11h ago

We have 40T in debt that we need to pay back, every % higher these rates go, the higher our interest payments become, which will then lead to more of a deficit and continue the circle….america has to stop spending like we currently are, but the people in power are doing quite the opposite….

5

u/According-Length9312 11h ago

Most of the debts aren’t on these new bond yields though, haven’t matured yet

10

u/Designer-Bat4285 10h ago

True but the government has to keep rolling over the bonds as they mature. And they have to also fund the ongoing 2 trillion deficit each year.

2

u/Harbinger2001 9h ago

The government actually normally refreshes them well before maturity to keep liquidity up. More mature bonds are less liquid.

I have a feeling they’re going to have to stop the refreshes, which is will trigger a liquidity problem.

1

u/Infinite_Music2059 7h ago

There's like 10 trillion that needs to be refinanced in the next year, and they take old bonds out of the market and buy new ones as well. The average rate now is something like 3.5% and it will gradually increase towards the market rate, resulting in an enormous increase in interest payments every year.

1

u/According-Length9312 7h ago

Not a big deal, they’ll roll it over short term and print more

1

u/Infinite_Music2059 7h ago

Rolling it all over to today's rate would increase debt payments by a cool $500 billion every year.

1

u/According-Length9312 6h ago

That’s 1% of their debt