美国重蹈覆辙：借贷或将使楼市再次崩盘
在2004年前后爆发的房地产热潮中，美国人拼命申请可调利率抵押贷款，这种贷款以超低的“诱惑利率”吸引人们购买超出能力范围的房屋。到2004年，有一半的购房者使用可调利率抵押贷款，这一比例是三年前的三倍。不过，这些诱惑利率只持续了几年时间，“重置”后的贷款利率远远更高。2007年的最后四个月，有两百万家庭目睹自己的还款额攀升35%。这一连锁反应加速了传说中的房屋止赎潮，摧毁了房地产市场。
如今，人们在筹措资金购买房屋时要谨慎得多，绝大多数的人会选择30年期固定利率贷款。这些家庭从一开始便有能力还清每个月的贷款，而且他们的工资会稳步增长，所以这笔固定数目的还款额占父母收入的比重就越来越小。这有助于他们积累起数目可观的储蓄金来持续偿还贷款，即使一方或双方失业好几个月，他们也有能力保住农场或房屋。没有什么比安全而长久的借贷更能够让房主酣睡的了。
的确，美国的房主们都把可调利率抵押贷款引发的灾难铭记于心。不过拜登新政府似乎和之前的特朗普团队一样，他们正在重蹈覆辙，再犯2007年那些倾心诱惑利率的人所犯的错误。拜登主张通过1.9万亿美元的“美国拯救计划”（American Rescue Plan），并在第二阶段筹集数万亿美元用于重建基础设施和其他行动，原因在于利率已经降至历史低点，而且注定会保持下去。拜登提名的财政部部长珍妮特•耶伦在其参议院确认听证会上宣布：“现在利率如此之低，我们最明智的做法就是有所大动作。”她补充道，“世道已经改变，我相信未来很长一段时间都会保持低利率。”
耶伦的确也发出了警告，表示“利率存在上升的风险”。另外，她也认同30年期固定利率是更加安全的做法。“利率非常低的时候发行长期债券来筹集资金还债，这是有好处的。”
但在过去的一年时间里，美国主要通过出售一年期以下（通常是少于六个月）的国债来偿还激增的联邦借贷。从耶伦的声明中并不能看出她是否会尝试发行期限更长且更安全的新债券，最可能出现的情况有两种。第一，拜登政府坚持以极短的借贷为主，这一做法十分诱人，因为可以在短时间内将利息支出保持在最低水平，并有助于控制赤字。不过这样会带来巨大的风险，因为6个月期国债等债券的价格是15个月前的两倍，价格飙升的话就将淹没预算。
第二，耶伦可能会将更高比例的新借贷转为长期债券。一个问题是，7年期和10年期国债的收益率最近在飙升，这可能标志着一个趋势的开始。通胀上升的速度比几个月前预计的要快，因此价格上涨和经济反弹的共同作用可能会将基准10年期国债以及所有其他长期和短期国债的收益率推向远高于目前的水平。
最根本的问题在于债务负担规模庞大，在新冠疫情爆发之前，美国的债务负担就已经非常重，而且还在不断增长，看不到尽头。到今年年底，用于重振经济的持续巨额支出将使美国的债务大山扩大至26万亿美元，较2019年跃升逾50%。简而言之，目前负担如此之大，以至于民众突然之间更容易受到利率上升的影响。现在如果利率整体上升0.5个百分点，美国的利息支出将比2019年同样的增长高出一半。
到目前为止，美国已经将潜在的损害降到了最低程度，在最短期限内为大部分井喷的债务融资，美国去年的利率也大幅下降。令人惊讶的是，债务爆炸式增长的同时利息负担却不断减少，这也让拜登团队相信能够继续挥霍下去。即使拜登和耶伦的团队采取更为传统的策略，将债券组合更多地转向长期，他们也仍然会出售数万亿一年期以下的债券。
拜登团队似乎远远低估了未来的风险。利率大幅波动，即便回到去年年初的水平，也将推动利率支出从国会预算办公室（CBO）预测的下降轨迹迅速上升，已经处在危险之中的未来预算赤字会大大增加。
当然，最危险的情况是过去一年所出现的那种，也最类似于可调利率抵押贷款的灾难。
短期考虑
美国财政部的最新债务和赤字数据更新至2020年12月31日。因此，它比截至9月的财年数据更贴近当前情况。美国在这个日历年经历了借贷狂潮，这是一个大新闻。最容易被忽视的是新债务到期时间的变化。截至2019年年底，美国公众持有的债务为16.66万亿美元。（这是有价证券融资的金额。）其中，2.34万亿美元（14.5%）是30年期国债，9.9万亿美元（60%）是一到十年期国债，大部分都是这种规模的短期国债。只有26%的人持有一年期以下的短期国库券，或者浮动债券和通胀保值债券，这些债券的利率并不固定，会随着市场波动，这意味着它们可以在短时间内大幅上涨。
2020年，美国的债务总额取得了4.3万亿美元的惊人增长，达到近21万亿美元。短期国库券、通胀保值债券和浮动债务的规模从2.4万亿美元跃升至4.96万亿美元，增幅达105%。相比之下，较安全的票据和债券的涨幅仅不到这个数字的三分之二。在全部增长中，62%来自票据或浮动利率债券。截至去年年底，33%的贷款属于这一类别，较2019年以来的7%大幅上升，债务总额则增长了逾四分之一。
这些年与年之间的对比仍然不能全面反映美国的债务时间表在过去一年收紧了多少。我们从短期国库券谈起，即便是一年期或不到一年的债券，美国也倾向于做空。美国债务管理办公室（Office of Debt Management）在1月的一份报告显示，剔除到期债券，90%国库券的发行期限为22周或更短。至于期限较长的票据（一至十年期），半数的发行期限在三年或以内。美国仅筹集了8320亿美元，不到新债券出售额的五分之一，这些债券的期限为5至30年，非常安全。
过去一年，投资者大举买入美国国库券，美国全部可转让债券的平均到期时间因此从70个月降至63个月。特朗普时期的财政部国债累累，原因显而易见。国债利率的惊人下跌在美国资本市场的历史上十分罕见，3个月期国债收益率从2020年年初的1.54%跌至年底的0.09%，跌幅达94%。长期利率也大幅下降，但这一趋势并未对降低整体利息成本起到多大作用。
为什么会这样？因为三分之二的借款仍然是5年或更长期限的证券。由于5年期、7年期、10年期和30年期国债的收益率增长缓慢，这些长期债券的平均利率是美国国债收益率的几倍。截至2020年12月31日，票据和债券的收益率分别为1.7%和3.4%，低于上年同期的2.1%和3.9%。较长期债券平均利率的小幅下降几乎帮不上忙，因为新发行10年期和30年期债券的利率上升更猛。最大的杠杆是短期国库券利率的惊人下跌，这些债券主要为激增的支出买单。
孤注一掷？
但是，如果押注国债利率将保持在当前水平，这是否属于鲁莽之举？三分之一的债务要么在不到一年的时间内到期（国库券），要么是浮动利率（可能会迅速飙升），其余三分之二债券的利率则会稳定较长一段时间。截至2019年9月，8周和26周国债的收益率均维持在2%。穆迪投资者服务公司（Moody's Investor Services）预计今年的通胀率将达到2%，而摩根大通（J.P. Morgan Chase）的首席执行官杰米•戴蒙在第四季度收益电话会议上表示价格可能会上涨3%甚至4%。美国国会预算办公室预计，随着经济从新冠疫情中反弹，今年的增长率将超过5%。10年期国债收益率已经从去年9月的不到0.7%跃升至1.1%。
如果所有关于未来低利率的预测都是错的，那会发生什么事情？在拜登公布他的1.9万亿美元计划之前，美国联邦预算问责委员会（Committee for a Responsible Federal Budget）曾经预测今年的赤字将达到2.3万亿美元，仅这一项额外支出就将使赤字达到至少4万亿美元。虽然并不确定，但我们假设其中一半的钱借自国库券，那么到2021年年底，可流通债务总额将从21万亿美元上升到25万亿美元，持有的短期国库券和其他浮动债券将从7万亿美元上升到9万亿美元。
然后我们再来想象一下，到2021年下半年，美国国债的平均利率回到2%。期限如此之短，我们将不得不在2022年年初对大部分债券进行再融资。到2022年，仅短期国库券和浮动债务的成本就将从不到50亿美元上升到1800亿美元左右，利息支出也将激增至5800亿美元左右。这比2019年的数目高出2000多亿美元，也将扼杀支出会大幅增加而利息支出会下降的乐观看法。5800亿美元的利息将吸收超过2.5%的GDP，远高于财政部前官员拉里•萨默斯和贾森•弗曼在最近一篇文章中提出的2%这一危险比例。萨默斯和弗曼认为，大幅增加支出才是正道，并预计其不可能达到GDP的2%。
但这是有可能发生的。如果真的如此，利息将在国民收入中占据越来越大的份额。即使利率低于国民收入的增长速度，利息也会越来越重，因为权益成本飙升将推动美国的赤字迅速增加。可调利率抵押贷款的不幸经历告诉我们，你不应该冒险借100万美元买房子，因为两年后的还款额可能会翻倍，而你的薪水还在一点点上升，无法支付那些大额还款。特朗普铤而走险，但在事与愿违之前选择放弃。如今，新政府更加相信“世道已经改变”，但如果世界恢复常态，下注房子将会被证明是失败之举。（财富中文网）
译者：秦维奇
在2004年前后爆发的房地产热潮中，美国人拼命申请可调利率抵押贷款，这种贷款以超低的“诱惑利率”吸引人们购买超出能力范围的房屋。到2004年，有一半的购房者使用可调利率抵押贷款，这一比例是三年前的三倍。不过，这些诱惑利率只持续了几年时间，“重置”后的贷款利率远远更高。2007年的最后四个月，有两百万家庭目睹自己的还款额攀升35%。这一连锁反应加速了传说中的房屋止赎潮，摧毁了房地产市场。
如今，人们在筹措资金购买房屋时要谨慎得多，绝大多数的人会选择30年期固定利率贷款。这些家庭从一开始便有能力还清每个月的贷款，而且他们的工资会稳步增长，所以这笔固定数目的还款额占父母收入的比重就越来越小。这有助于他们积累起数目可观的储蓄金来持续偿还贷款，即使一方或双方失业好几个月，他们也有能力保住农场或房屋。没有什么比安全而长久的借贷更能够让房主酣睡的了。
的确，美国的房主们都把可调利率抵押贷款引发的灾难铭记于心。不过拜登新政府似乎和之前的特朗普团队一样，他们正在重蹈覆辙，再犯2007年那些倾心诱惑利率的人所犯的错误。拜登主张通过1.9万亿美元的“美国拯救计划”（American Rescue Plan），并在第二阶段筹集数万亿美元用于重建基础设施和其他行动，原因在于利率已经降至历史低点，而且注定会保持下去。拜登提名的财政部部长珍妮特•耶伦在其参议院确认听证会上宣布：“现在利率如此之低，我们最明智的做法就是有所大动作。”她补充道，“世道已经改变，我相信未来很长一段时间都会保持低利率。”
耶伦的确也发出了警告，表示“利率存在上升的风险”。另外，她也认同30年期固定利率是更加安全的做法。“利率非常低的时候发行长期债券来筹集资金还债，这是有好处的。”
但在过去的一年时间里，美国主要通过出售一年期以下（通常是少于六个月）的国债来偿还激增的联邦借贷。从耶伦的声明中并不能看出她是否会尝试发行期限更长且更安全的新债券，最可能出现的情况有两种。第一，拜登政府坚持以极短的借贷为主，这一做法十分诱人，因为可以在短时间内将利息支出保持在最低水平，并有助于控制赤字。不过这样会带来巨大的风险，因为6个月期国债等债券的价格是15个月前的两倍，价格飙升的话就将淹没预算。
第二，耶伦可能会将更高比例的新借贷转为长期债券。一个问题是，7年期和10年期国债的收益率最近在飙升，这可能标志着一个趋势的开始。通胀上升的速度比几个月前预计的要快，因此价格上涨和经济反弹的共同作用可能会将基准10年期国债以及所有其他长期和短期国债的收益率推向远高于目前的水平。
最根本的问题在于债务负担规模庞大，在新冠疫情爆发之前，美国的债务负担就已经非常重，而且还在不断增长，看不到尽头。到今年年底，用于重振经济的持续巨额支出将使美国的债务大山扩大至26万亿美元，较2019年跃升逾50%。简而言之，目前负担如此之大，以至于民众突然之间更容易受到利率上升的影响。现在如果利率整体上升0.5个百分点，美国的利息支出将比2019年同样的增长高出一半。
到目前为止，美国已经将潜在的损害降到了最低程度，在最短期限内为大部分井喷的债务融资，美国去年的利率也大幅下降。令人惊讶的是，债务爆炸式增长的同时利息负担却不断减少，这也让拜登团队相信能够继续挥霍下去。即使拜登和耶伦的团队采取更为传统的策略，将债券组合更多地转向长期，他们也仍然会出售数万亿一年期以下的债券。
拜登团队似乎远远低估了未来的风险。利率大幅波动，即便回到去年年初的水平，也将推动利率支出从国会预算办公室（CBO）预测的下降轨迹迅速上升，已经处在危险之中的未来预算赤字会大大增加。
当然，最危险的情况是过去一年所出现的那种，也最类似于可调利率抵押贷款的灾难。
短期考虑
美国财政部的最新债务和赤字数据更新至2020年12月31日。因此，它比截至9月的财年数据更贴近当前情况。美国在这个日历年经历了借贷狂潮，这是一个大新闻。最容易被忽视的是新债务到期时间的变化。截至2019年年底，美国公众持有的债务为16.66万亿美元。（这是有价证券融资的金额。）其中，2.34万亿美元（14.5%）是30年期国债，9.9万亿美元（60%）是一到十年期国债，大部分都是这种规模的短期国债。只有26%的人持有一年期以下的短期国库券，或者浮动债券和通胀保值债券，这些债券的利率并不固定，会随着市场波动，这意味着它们可以在短时间内大幅上涨。
2020年，美国的债务总额取得了4.3万亿美元的惊人增长，达到近21万亿美元。短期国库券、通胀保值债券和浮动债务的规模从2.4万亿美元跃升至4.96万亿美元，增幅达105%。相比之下，较安全的票据和债券的涨幅仅不到这个数字的三分之二。在全部增长中，62%来自票据或浮动利率债券。截至去年年底，33%的贷款属于这一类别，较2019年以来的7%大幅上升，债务总额则增长了逾四分之一。
这些年与年之间的对比仍然不能全面反映美国的债务时间表在过去一年收紧了多少。我们从短期国库券谈起，即便是一年期或不到一年的债券，美国也倾向于做空。美国债务管理办公室（Office of Debt Management）在1月的一份报告显示，剔除到期债券，90%国库券的发行期限为22周或更短。至于期限较长的票据（一至十年期），半数的发行期限在三年或以内。美国仅筹集了8320亿美元，不到新债券出售额的五分之一，这些债券的期限为5至30年，非常安全。
过去一年，投资者大举买入美国国库券，美国全部可转让债券的平均到期时间因此从70个月降至63个月。特朗普时期的财政部国债累累，原因显而易见。国债利率的惊人下跌在美国资本市场的历史上十分罕见，3个月期国债收益率从2020年年初的1.54%跌至年底的0.09%，跌幅达94%。长期利率也大幅下降，但这一趋势并未对降低整体利息成本起到多大作用。
为什么会这样？因为三分之二的借款仍然是5年或更长期限的证券。由于5年期、7年期、10年期和30年期国债的收益率增长缓慢，这些长期债券的平均利率是美国国债收益率的几倍。截至2020年12月31日，票据和债券的收益率分别为1.7%和3.4%，低于上年同期的2.1%和3.9%。较长期债券平均利率的小幅下降几乎帮不上忙，因为新发行10年期和30年期债券的利率上升更猛。最大的杠杆是短期国库券利率的惊人下跌，这些债券主要为激增的支出买单。
孤注一掷？
但是，如果押注国债利率将保持在当前水平，这是否属于鲁莽之举？三分之一的债务要么在不到一年的时间内到期（国库券），要么是浮动利率（可能会迅速飙升），其余三分之二债券的利率则会稳定较长一段时间。截至2019年9月，8周和26周国债的收益率均维持在2%。穆迪投资者服务公司（Moody's Investor Services）预计今年的通胀率将达到2%，而摩根大通（J.P. Morgan Chase）的首席执行官杰米•戴蒙在第四季度收益电话会议上表示价格可能会上涨3%甚至4%。美国国会预算办公室预计，随着经济从新冠疫情中反弹，今年的增长率将超过5%。10年期国债收益率已经从去年9月的不到0.7%跃升至1.1%。
如果所有关于未来低利率的预测都是错的，那会发生什么事情？在拜登公布他的1.9万亿美元计划之前，美国联邦预算问责委员会（Committee for a Responsible Federal Budget）曾经预测今年的赤字将达到2.3万亿美元，仅这一项额外支出就将使赤字达到至少4万亿美元。虽然并不确定，但我们假设其中一半的钱借自国库券，那么到2021年年底，可流通债务总额将从21万亿美元上升到25万亿美元，持有的短期国库券和其他浮动债券将从7万亿美元上升到9万亿美元。
然后我们再来想象一下，到2021年下半年，美国国债的平均利率回到2%。期限如此之短，我们将不得不在2022年年初对大部分债券进行再融资。到2022年，仅短期国库券和浮动债务的成本就将从不到50亿美元上升到1800亿美元左右，利息支出也将激增至5800亿美元左右。这比2019年的数目高出2000多亿美元，也将扼杀支出会大幅增加而利息支出会下降的乐观看法。5800亿美元的利息将吸收超过2.5%的GDP，远高于财政部前官员拉里•萨默斯和贾森•弗曼在最近一篇文章中提出的2%这一危险比例。萨默斯和弗曼认为，大幅增加支出才是正道，并预计其不可能达到GDP的2%。
但这是有可能发生的。如果真的如此，利息将在国民收入中占据越来越大的份额。即使利率低于国民收入的增长速度，利息也会越来越重，因为权益成本飙升将推动美国的赤字迅速增加。可调利率抵押贷款的不幸经历告诉我们，你不应该冒险借100万美元买房子，因为两年后的还款额可能会翻倍，而你的薪水还在一点点上升，无法支付那些大额还款。特朗普铤而走险，但在事与愿违之前选择放弃。如今，新政府更加相信“世道已经改变”，但如果世界恢复常态，下注房子将会被证明是失败之举。（财富中文网）
译者：秦维奇
During the housing frenzy that took off around 2004, Americans gorged on adjustable-rate mortgages, featuring super-low "teaser" payments that enticed folks to buy more house than they could afford. By 2004, half of all home buyers were using ARMS, triple the share three years before. But the teasers lasted just a couple of years, then loans "reset" at much higher rates–––two million families saw their payments climb by as much as 35% in the last four months of 2007. That rippling shock hastened the storied flood of foreclosures that wrecked the housing market.
Today, folks are taking a much more prudent approach to financing their homes. They overwhelmingly going with 30-year loans at fixed rates. Since the family can make the monthly nut from day one, and their paychecks grow over the years, the ever-flat payment takes less and less of mom and dad's incomes. That helps them build a nice nest egg, so they can keep paying, and keep the ranch or colonial, if one or even both of them are out of work for a few months. Nothing does more to keep homeowners sleeping soundly than borrowing safe and long.
Indeed, America's homeowners took the ARM disaster to heart. But it appears that the new Biden Administration, just as the Trump team before it, is making the same mistake as the crowd that fell for teaser rates in 2007. Biden asserts that America can afford to spend the $1.9 trillion on his American Rescue Plan, followed by a phase two that would raise more trillions for rebuilding infrastructure and other initiatives, because interest rates have sunk to historic lows, and are destined to stay there. At her Senate confirmation hearing, Janet Yellen, Biden nominee for Treasury Secretary, declared that "Right now, with interest rates so low, the smartest thing we can do is act big." She added, "The world has changed. I believe the future is likely to bring low interest rates for a long time."
Yellen did provide notes of caution. "It is a risk that interest rates will rise," she warned. She also endorsed the "the 30-year fixed choice is safer" approach. "There is an advantage to funding the debt...when interest rates are very low by issuing long-term debt."
But in the past year, the U.S. has mostly financed the explosion in federal borrowings by selling Treasuries that come due in less than a year, more often in under six months. It's unclear from Yellen's statements whether she'll attempt to float new debt at longer, safer maturities. One of two scenarios are mostly likely. In the first, the Biden Administration holds to primarily borrowing extremely short. That's tempting, because it's the course that would keep interest expense lowest, and help curb deficits, in the immediate future. But the risks are towering, because a jump in the likes of 6-month Treasuries, which were at double today's levels 15 months ago, would swamp the budget.
Second, Yellen could shift a higher proportion of the new borrowings to longer-term bonds. One problem is that the recent spike in yields on 7 and 10-year Treasuries could mark the start of a trend. Inflation is heading upwards faster than projected a few months ago, so the confluence of rising prices and a rebounding economy could push yields on the benchmark 10-year, and all other Treasuries long and short, well beyond today's levels.
The most fundamental problem is sheer size of a debt load that was already huge and growing with no end in sight before the pandemic struck. The gigantic, ongoing spending gauged to recharge the economy will swell the debt mountain to as much as $26 trillion by the close of this year, a jump of over 50% from 2019. Put simply, that burden is now so big that we're suddenly much more vulnerable to any rise in rates. A jump of .5 points overall means America's tab for interest will be half-again higher than if the same increase happened in 2019.
So far, the U.S. has minimized the potential damage by financing most of the blowout at the shortest maturities, where rates plunged all during last year. Amazing, that's kept our interest burden shrinking at the same time debt exploded, and given the Biden team confidence that it's safe to keep the splurge going. Even if the Biden-Yellen team pursues a more traditional strategy by shifting the mix more towards longer-term securities, it will still be selling trillions in bonds with maturities of less than a year. We could easily have $9 trillion in that "ARM category," equivalent to half of all debt last year, by the end of 2019.
The Biden team appears to be way underestimating the danger ahead. Rates are highly volatile, and a shift back to even the levels of early last year will drive interest expense from the declining trajectory now projected by the CBO, to a rapidly-rising curve that will greatly deepen future budget deficits already on a dangerous course.
Of course, the riskiest scenario is the one followed in the past year, and the one that most resembles the misadventure in ARMs.
Short-term thinking
The latest data on debt and deficits from the U.S. Treasury provide an update through December 31, 2020. Hence, it's more current than the numbers for the fiscal year ended in September. In that calendar year, the U.S. experienced a borrowing rampage that's been big news. What's mostly overlooked is the change in when that new debt comes due. At the close of 2019, U.S. debt held by the public stood at $16.66 trillion. (That's the amount financed by marketable securities.) Of that number, $2.34 trillion or 14.5% was in 30-year Treasury Bonds, and $9.9 trillion or 60% in Treasury notes with maturities of over one to ten years––as we'll seen, most are on the short tranche of that scale. Just 26% sat in either Treasury bills or T-Bills at less than one year, or such securities at floating and inflation-protected bonds (TIPS) whose rates aren't fixed, but move with the market, meaning they can jump at short notice.
In 2020, total debt grew by a staggering $4.3 trillion to almost $21 trillion. The volume of T-Bills, TIPs and floating debt jumped by 105%, from $2.4 to $4.96 trillion. By contrast, the safer Notes and Bonds rose by less than two-thirds that amount. Of the total increase, 62% came from Bills or floating rate bonds. By the end of last year, 33% of all borrowings were in that category, a jump from 7 points since 2019, on total debt that than expanded by over a quarter.
Those year-over-year comparisons still don't give the full picture of how much our debt timetable tightened in the past year. Let's start with T-Bills. Even for those one-year-or-less securities, the U.S. leaned short. A report in January from the Office of Debt Management reveals that 90% of Treasury bills, net of those that matured, were issued at terms of 22 weeks or less. As for longer-dated Notes (one to ten year instruments), half of were issued at three years or less. The U.S. raised only $832 billion, less than one-fifth of the new debt sold, in highly-safe maturities of five to thirty years.
The swing to T-Bills has in the past year lowered the average maturity on all U.S. marketable debt from 70 to 63 months. It's obvious why the Trump Treasury banked so heavily in T-Bills. Their rates staged one of the most stunning drops in the history of U.S. capital markets. The yield on 3-month T-Bills cratered from 1.54% at the start of 2020 to .09% by year end, a fall of 94%. Long rates fell sharply as well. But that trend didn't do nearly as much to hold down overall interest costs.
Why? Two-thirds of all borrowing are still in securities with maturities of five years or more. Since those 5, 7, 10 and 30-years roll off slowly, the average rates on that long-dated debt are multiples of what the U.S. is paying on T-bills. As of December 31, the Treasury was paying 1.7% on Notes and 3.4% on Bonds, down from 2.1% and 3.9% respectively a year earlier. That slight decrease in average rates on longer-dated debt provided little help, since an increase in newly-issued 10 and 30 years blunted the drop in rates. The big lever was the astounding drop in rates on the T-bills that mainly paid for the blowout in expenditures.
A reckless bet?
But is it reckless to bet that T-bill rates will remain at current levels? One-third of the entire debt load is either due in less than a year (T-Bills) or in floating-rate instruments where rates can spike quickly, interest on the remaining two-thirds is locked in for much longer periods. As late as September of 2019, yields on both 8 and 26 week bills stood at 2%. Moody's Investor Services predicts that inflation will reach 2% this year, and J.P. Morgan Chase CEO Jame Dimon on his Q4 earnings call said that prices could rise 3% or even 4%. The CBO expects growth to exceed 5% for the year as the economy rebounds from the COVID crisis. The yield on the 10-year has already jumped from under .7% in September to 1.1%.
What happens if all the forecasts of "low-rates to the horizon" are wrong? The Committee for a Responsible Federal Budget was forecasting a $2.3 trillion deficit for this year before Biden unveiled his $1.9 trillion plan. That extra spending alone would put the shortfall at a minimum of $4 trillion. Let's assume half that amount is borrowed in T-bills, though we don't know that for sure. But if that's the case, total marketable debt would go from $21 to $25 trillion by the end of 2021, and T-Bills and other floating bond holdings would rise from $7 trillion to $9 trillion.
Then, let's imagine that in the second half of 2021, the average rate on T-bills goes back to 2%. Maturities are so short we'd have to refinance most of them by early 2022. In 2022, the cost of that T-bill and floating debt alone would be rising to something like $180 billion from just under $5 billion. Interest payments would explode to around $580 billion. That's more than $200 billion higher than in 2019, and it would kill the rosy view that spending can jump while interest payments fall. At $580 billion, interest would be absorbing over 2.5% of GDP, well above the 2% the former Treasury officials Larry Summers and Jason Furman deemed dangerous in a recent article. Summers and Furman believe a spending splurge is the way to go, and predict getting to 2% of GDP won't happen.
But it might. And if it does, interest will keeping a bigger and bigger share of national income. Even if rates are below the pace of growth in national income, interest will take increasing bites because our deficits, driven by the surging cost of entitlements, will grow so rapidly. The ARM mishap showed us that you shouldn't risk borrowing $1 million to buy a house when the payment could double two years from now, on a salary that's inching up and can no longer stretch to make those big payments. Trump took that risk, but departed before it could backfire. Now, the new administration's doubling down on the belief that the "world has changed." But if the world goes back to anything like normal, betting the house will prove to be a loser.
