The start of the Federal Reserve’s rate cuts last month was expected to bring bond yields down—and take some pressure off the spiraling U.S. debt burden.
Last month, Apollo Global Management chief economist Torsten Sløk noted that with U.S. debt now at $35.3 trillion, interest expenses average out to $3 billion a day. That’s up from $2 billion about two years ago, when the Fed began its rate-hiking campaign to rein in inflation. At the time, he had hope for the anticipated Fed rate cuts.
“If the Fed cuts interest rates by 1%-point and the entire yield curve declines by 1%-point, then daily interest expenses will decline from $3 billion per day to $2.5 billion per day,” Sløk estimated.
So far, it’s not working out that way.
To be sure, Treasury yields tumbled ahead of the first rate cut as investors looked for an aggressive easing cycle to match its aggressive tightening cycle.
But since the Fed’s…
