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After the debt ceiling drama

Less than a month after the #debtceiling was raised has passed and the US Treasury has increased the debt in $572Bn, surpassing the $32Tn mark. Not only it’s important that we’re increasing the amount of debt at an alarming rate, but the cost of this new issued debt is 5 times higher than it was in 2021. It will generate $30bn in annual interest expense and If we extend that calculation to the whole curve, the average coupon of US treasury debt will be now around 3%, which will generate $1Tn of interest expense, or 4% of #gdp. One of the most important indirect implications of #ratehikes, is that all the dollar denominated debt in the world, including corporates, other governments, etc, will reset at these levels as well (plus a spread), creating trillions of dollars in debt costs. This credit cycle is going to be really interesting.

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