The Treasury Borrowing Advisory Committee warned in August of a $1.45 trillion funding shortfall for fiscal 2027-28. Treasury Secretary Scott Bessent has heavily relied on short-term borrowing (T-bills) at lower rates to finance the approximately $2 trillion annual deficit. Interest costs surged by $120 billion this year, with total interest now exceeding $1 trillion annually, surpassing defense spending. A collision looms as Treasury is forced back toward long-term bonds while the Fed under new Chair Kevin Warsh moves to shrink its balance sheet, creating converging waves of long-term supply with fewer buyers. Analysts warn that Treasury debt, the backbone of the global financial system, shows potential cracks that could expose the entire financial architecture.
Source: Read the original article
