Because the U.S. government is running substantial budget deficits, the U.S. Treasury is borrowing heavily at its regular auctions of Treasury bills, notes, and bonds—nearly $1 trillion of additional net issuance in the first six months of calendar year 2024 alone.
The U.S. government’s growing appetite for borrowing—and occasional hiccups in the $27 trillion market for Treasury debt—prompt occasional concerns that investors may someday balk at lending to the U.S. government. Some market participants speculate about the possibility of a “failed auction” or a “financial crisis” of some sort.
Of course, the primary measure of the interaction between the supply of Treasury debt and investors’ demand for it is the interest rate (or yield) that the Treasury pays to borrow at those auctions. The more demand—that is, the more eager investors are to lend to the U.S….
