- U.S. debt tops $37T, with about $29T in marketable Treasuries that must be refinanced and are more exposed to rate and sentiment shifts.
- Long yields near 5% persist as inflation risk, heavy issuance/refinancing needs, reduced foreign demand, and higher term premiums lift borrowing costs.
- Auctions look stable on bid-to-cover, but primary dealers’ share has fallen to historic lows, raising questions about market-making capacity and demand resilience.
- Treasury aims to keep issuance regular and adjust sizes gradually, even as looming maturities and structural deficits intensify fiscal pressures.
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The U.S. national debt has surged past $37 trillion as of mid-2025, with marketable debt—debt held by investors rather than intragovernmental obligations—comprising about $29 trillion. This shift amplifies exposure to interest rate changes and investor sentiment, since marketable debt must be refinanced in the market. Growing interest rates increase the burden of interest payments, already reaching $841 billion through the first 10 months of FY2025, and projected to nearly double over the next decade.
10-year Treasury yields have stayed elevated near 5 percent, even as the Federal Reserve began easing short-term rates in late 2024. These elevated long yields reflect not only inflationary pressures and expectations but also greater fiscal risk—large deficits and heavy issuance of marketable debt. A rising term premium is contributing as investors want more compensation for holding long‐term securities amid uncertainty.
Auction metrics provide more granular insight: bid-to-cover ratios for benchmark 10-year notes hover around historical medians, showing continuing demand, although not necessarily strong surplus demand. However, primary dealers—the conventional backstops in Treasury auctions—have seen their awarded share decline to record lows: 4.2 % for a 10-year auction in September 2025 and 8.7 % for a 30-year auction in October 2025, both levels unseen in nearly two decades. This suggests that others—possibly non-dealer investors—are increasingly absorbing issuance, but also points to potential stress in dealer liquidity and capacity issues.
Refinancing pressures are notable: about $9.2 trillion of marketable debt will mature by end-2025, with another similar amount in 2026. Coupled with reduced foreign appetite for Treasuries—foreign holdings and foreign allotment in auctions have declined substantially since a decade ago—the U.S. is increasingly reliant on domestic non-dealer sources and possibly less stable demand.
Treasury policy response, through statements from Secretary Bessent, indicates an intent to maintain “regular and predictable” coupon auction sizes but to adjust issuance gradually, reflecting market feedback in order to avoid dislocations. Some flexibility has been gained via reduced deficits and Federal Reserve operations in the T‐bill market. However, with structural deficit and demographic headwinds, along with term premium pressures, strategic choice points loom around maturity mix, foreign vs domestic demand, and maintaining investor confidence.
Strategic implications include: higher interest expense which could crowd out discretionary spending; tighter borrowing conditions for private sector; inflation and inflation expectations remaining elevated; risks to credit rating and dollar’s reserve status; and the need for fiscal policy reforms, perhaps focused on spending discipline, revenue measures, or shifting maturity profiles.
Open questions: How will foreign demand evolve in the face of geopolitical risk and yield competition? What is the feasible maturity mix (short vs long) treasury can issue without destabilizing yields? Can fiscal consolidation be achieved sufficiently to reassure markets? How will monetary policy interplay with rising fiscal deficits and rising term premiums?
Supporting Notes
- National debt is over $37 trillion, with approximately $29 trillion of that in marketable (public-held) debt issued via auctions and trading in secondary markets.
- Interest rates on marketable debt averaged roughly 3.4 % in mid-2025, more than double early 2022 rates, with net interest payments through first 10 months of FY2025 totaling about $841 billion, set to rise sharply in coming years.
- Count of Treasury securities maturing: ~$9.2 trillion of marketable debt matures by end-2025; another ~$9 trillion in 2026, due in part to increased issuance of short-term securities during the pandemic.
- Bid-to-cover ratios for benchmark 10-year note auctions remain near median (≈ 2.52), indicating stable though not exuberant demand.
- Primary dealers’ awarded share in 10-year auctions dropped to ~4.2 % in September 2025; in 30-year auctions down to ~8.7 % in October 2025, both being historic lows.
- Foreign share of U.S. Treasury holdings has declined from nearly 48 % a decade ago to about 32 % recently; foreign auction allotment dropped similarly from ~21 % to ~9 % in early 2025.
- 10-year Treasury yields have lingered near or slightly below 5 % in major auctions (e.g. $39 billion 10-year note at ~4.42 %), 30-year yields above 4.80 % in some cases, reflecting tight supply/demand and fiscal concerns.
- Treasury Secretary Bessent has affirmed that coupon issuance will remain stable over next several quarters; auction sizes will be adjusted gradually, and issuance will aim for predictability.