Comments on: The National Debt's APR?

Question: The National Debt's APR?

gsteff — Thu, 04 Nov 2004 12:02:22 -0800

What interest rate does the U.S. pay on the national debt, and is that number likely to change as the debt increases?

By: andrew cooke

andrew cooke — Thu, 04 Nov 2004 12:32:06 -0800

i think you want this table for a general overview. seems like each bond issue has a different rate these days, so you need to click aroud that site for specific information if you have something particular in mind (if you could find a recent history of rates then it would help answer your second question).

or have i misunderstood how the world works?

By: trharlan

trharlan — Thu, 04 Nov 2004 12:44:54 -0800

andrew cooke's answer is a good start. I cannot find a big table that has all outstanding treasury debt by maturity, issuance, and coupon, so it's hard to tell what the structure of the existing debt looks like. Much of the high-coupon paper issued in the late 70s and early 80s has been retired (and that was one reason that the end of the nineties was so good).

The laws of supply and demand dictate that (ceteris paribus) as the amount of debt issued increases, its price must decrease (the yield will go up), but credit markets are still hungry for government bonds. For now, I don't expect any major waves. In the short run, with rates where they are now, I doubt that the carrying charges on the debt will substantially increase.

By: loquax

loquax — Thu, 04 Nov 2004 14:07:41 -0800

I've always thought of it in terms of the lendor-lendee relationship.

The US, or any government is asking investors for a loan. The interest paid is going to be a function of the confidence investors have that their money will be returned to them. The size of the debt will of course have an impact on that confidence as part of the credit worthiness and the debt-to-income ratio of the loan applicant. In the case of the US, this is not an immediate concern. I would, however, look at other economic factors (such as the trade surplus/deficit, political instability, value of the currency, peak oil, etc) that would prevent a country from servicing its debt in the future before I would look at the debt itself.