Rising Outlays, Stagnant Revenue: Expenditures have notably increased as a share of GDP, while revenue has remained largely unchanged.
Drivers of Rising Government Expenditures: Spending has increased due to rising health and pension costs from an aging population, along with higher interest payments on debt.
T-Bill Share of Treasury Debt Remains Modest: The share of outstanding debt held in T-bills is currently in line with the Treasury Borrowing Advisory Committee’s (TBAC) recommendation. It’s likely to rise in the coming years—the question is by how much.
However, T-Bills Outstanding (As % of GDP) Are Elevated: Pushing this higher could increase refinancing risk and strain primary dealer balance sheet capacity.
Weighted Average Maturity (WAM) of Debt Is High: This is likely to fall in the coming quarters.
$9 Trillion in US Debt Set to Mature within a Year: This represents almost 1/3 of all outstanding Treasuries.
US Interest Burden in Global Context: The US faces elevated interest costs (as a % of GDP) compared to much of the developed world.
Largest Foreign Holders of US Treasuries: China and Japan still hold massive amounts of US Treasuries, but both have reduced their holdings in recent years. Meanwhile, stablecoins now rank as the 18th largest holder. If the US dollar stablecoin market grows meaningfully, a significant new buyer of US Treasuries could emerge.
Ownership of Treasuries Evolving: Domestic investors will likely need to absorb a higher share of Treasury issuance going forward.
Can AI Fix the Fiscal Crisis?: If AI boosts productivity and economic growth, the CBO estimates it could significantly improve the trajectory of US fiscal debt.
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Groupthink is bad, especially at investment management firms. Brandywine Global therefore takes special care to ensure our corporate culture and investment processes support the articulation of diverse viewpoints. This blog is no different. The opinions expressed by our bloggers may sometimes challenge active positioning within one or more of our strategies. Each blogger represents one market view amongst many expressed at Brandywine Global. Although individual opinions will differ, our investment process and macro outlook will remain driven by a team approach.
