Interest expense on Treasury Debt is climbing higher as Treasury Debt issues roll over at higher rates. 42% of Treasury Debt outstanding is in the form of Treasury Notes at an average interest rate of 2.08%. Notes that roll over will do so at a rate much higher than 2.08%, thereby pushing up the average interest rate on Total Treasury Debt, which currently sits at 2.92%.
- At 2.92%, the Interest Expense on Total Treasury Debt ($33 Trillion), is $964 Billion, or approximately 21% of Federal Government Tax Revenue.
- If the entire $33 Trillion debt load had an average interest rate of 5.50% (Fed Funds), the total Interest Expense would be $1.8 Trillion or 40% of Federal Government Tax Revenue.
- Therefore, it is not realistic to expect the Fed to maintain its Fed Funds Rate at 5%-plus for much longer. Otherwise, Federal Government revenue and spending would be consumed by Interest Expense.
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