newsmart • Latest News & News Feed

axios.com | 5 hrs. 5 min. ago

The tab is coming due for America's borrowing binge

#AI #Benchmark #bond #Bonds #Consumer Prices #debt #Diesel #economy #energy #energy prices #Federal Reserve #gasoline #GDP #Inflation #interest rate #Interest Rates #Iran #Li #market #mortgage #SET #Taxes #Trump #yield

Americans are facing a rising tab as a multi-decade borrowing binge collides with a spike in energy prices caused by the Iran war.The big picture: Long-term interest rates are surging, as are consumer prices.It's a toxic mix of near-term inflation pressures and years of fiscal imbalance.Driving the news: The yield on the benchmark 10-year U.S. Treasury note rose to 4.97% Friday, up a full percentage point since the end of February, and only a hair below its high since 2007.The rate on a 30-year fixed-rate mortgage has risen in lockstep, reaching 7.08% Friday, per Mortgage News Daily — the highest in more than a year.State of play: The immediate catalyst Friday was an inflation report that showed consumer prices surging higher in August, with gasoline prices accounting for more than a third of the gain. Gasoline is now at a national average of $4.29 a gallon, while the price of diesel has climbed to over $6 a gallon.All this means that the Federal Reserve is now expected to raise its target interest rate this week.But longer-term borrowing rates are set in global markets — and determined by bigger forces.The U.S. government is spending about $2 trillion a year more than it raises in taxes at a time the cumulative debt is already roughly 100% of a year's GDP.Long-term bond yields have been rising worldwide, reflecting both high government borrowing and demand for capital from the AI buildout.The intrigue: The recent spikes have taken place in spite of interventions by Treasury Secretary Scott Bessent to try to smooth turbulent bond markets — efforts that haven't succeeded in making borrowing cheaper.And rather than focus on the deficit reduction the bond market wants, President Trump has floated the notion of $5,000 payments to all U.S. adult citizens if Republicans win midterm elections.The U.S. government is already spending around $1 trillion a year in interest on the debt, on track to rise to $2 trillion over the next decade, a new high as a share of the economy. If the recent surge in rates is sustained, those numbers will grow even higher.The bottom line: The combination of near-term energy-driven inflation and the long-term debt trajectory means that it will cost more to borrow money for the foreseeable future.

curated by newsmart.ch

newsmart – Business

Surging inflation puts interest rates back in focus as policymakers meet in Japan, US and UK

Bank set to hold interest rates but ‘needs to be ready’ to act on inflation

The tab is coming due for America's borrowing binge

Loan interest rates, EMIs to rise? Two back-to-back 25 bps repo rate hike from RBI soon?

Bessent’s attempts to suppress interest rates could spark a recession

Are we in for another GFC? Will interest rates soar? Is Hanson crazy? I asked this economist

₹1 lakh investment: NSC vs KVP — Which Post Office scheme offers a higher maturity value? Check out the calculations

Wall Street week ahead: Federal Reserve decision on interest rates, retail sales update

Hawkins Cookers FD opens on September 16; Know interest rates, minimum deposit required and other details

Gold climbs on dip-buying, Fed rate hike bets rise after US inflation data

Stocks climb but US data boosts predictions of Fed interest rate hike

No relief from inflation as Middle East clash lifts fuel prices to painful levels