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#Fed8: The surge in long-term U.S.

2026-07-15·x-repost-20260715-164505
#Fed8: The surge in long-term U.S. bond yields may become a powder keg for the next financial crisis ## U.S. long-term bond yields cannot be lowered The bottom line is that from the market's perspective: The U.S. government has huge long-term problems.

The deficit is increasing year by year, the interest cannot be covered, and the issuance of national debt continues. The U.S. industry faces huge long-term problems. Without the support of its own industrial advantages, inflation will inevitably occur in the long run. The U.S. dollar has a big long-term problem.

There is no industrial support and huge government spending. Can the Federal Reserve really make that green dollar knife encrusted with gold? In 1973, the United States had already torn off this golden rim from the US dollar. ## 1/Inflation expectations The Fed now mainly looks at personal consumption expenditures (PCE) for inflation.

Although the current PCE index in April is around 3.8% year-on-year, which is in line with market expectations, that is to say, there is no "expectation" of severe inflation. There are obviously signs of "head tilting". (Thanks to the public account: Danhu Fisherman, infringement deleted) Wash said that he prefers to look at the censored mean PCE data.

From this data alone, it is still trending flat, so there is no need to panic. AI is in full swing, The non-farm employment data exceeded expectations, but judging from the U.S. per capita income and the U.S. personal savings rate, the data continued to decline. The long-term K-shaped economic pattern in the United States is also taking shape.

The U.S.-led AI industry chain (Hynix + Samsung + TSMC + Nvidia) is at its peak, and it is indeed making real money right now, but is this a competitive advantage that can maintain a monopoly in the long term? uncertain.

We still firmly believe that China’s AI industry chain will bring chips and storage to cabbage prices, and will also drive tokens to cabbage prices. Once the industrial chain controlled by the United States loses its competitive advantage, local inflation will be inevitable. ## 2/Rapidly Deteriorating U.S. Finances Long-term U.S.

bond yields remain high, but what everyone is really afraid of is not inflation, but another pre-problem of inflation: poor U.S. finances. In May 2025, Moody's downgraded the U.S. credit rating from the highest level Aaa to the next lower level Aa1. In the past ten years, the average size of the U.S.

government's deficit has been approximately US$1.56 trillion. In the past five years, this size has risen to 1.9 trillion, with the highest deficit reaching 3.13 trillion in 2020. This kind of deficit has long been a normal phenomenon.

Even under an optimistic economic environment in 2025, the deficit will still be as high as about 1.8 trillion US dollars, accounting for nearly 6% of GDP. The main spending direction of the deficit has shifted to long-term structural directions such as soaring interest payments, rigid growth of statutory benefits, and erosion of the tax base.

The average annual fiscal revenue of the United States over the past five years has been less than US$5 trillion. The total amount of existing U.S. debt has reached 38 trillion U.S. dollars, which means that interest payments may account for a very large proportion of federal fiscal revenue. At present, this proportion has reached 19%.

This means that for every dollar the government collects in taxes, nearly 20 cents goes directly to pay interest on the debt. This ratio will still be around 9% in 2021. The reason is the rapid expansion of the scale of national debt and the sharp rise in national debt interest rates.

In fiscal year 2026, net interest payments on the federal debt are expected to exceed $1 trillion, exceeding the annual defense budget for the first time in history and becoming one of the largest single expenditures in the federal finance. This means that the maintenance of financial hegemony may begin to lose its support for military hegemony.

In September 2025, the weighted interest rate burden of the U.S. government is approximately 3.25%. As the proportion of medium- and long-term U.S. bonds issued during the high-interest cycle increases, this is expected to rise to more than 3.4% in fiscal year 2026.

This level is already more than double the historical low of 1.5% before the 2022 interest rate hike cycle. Gross estimates estimate that by 2036, U.S. fiscal revenue may not be enough to pay interest on U.S. debt. ## 3/The U.S. government still (helplessly) has to increase the supply of national debt. The issuance of U.S.

Treasury bonds is generally divided into total issuance and net issuance. We know the net issuance, and the total issuance includes maturity refinancing. The total issuance volume in 2025 will be approximately US$31 trillion, equivalent to 110% of GDP. Net issuance exceeds $2 trillion.

In order to avoid high-interest long-term bonds (more than 10 years), the new long-term Treasury bonds issued by the U.S. government in 2025 will only account for about 1.6% of the total.

The one-year (inclusive) short-term government bonds (T-Bills) reached 85% , through such short-term and long-term issuances, the proportion of the stock of long-term government bonds is continuously diluted. Currently, this proportion is diluted to about 17%. The short hair is still long, the US government interest rate is cheaper.

Buy short and sell long, and the Fed's body has become flexible. But the problem arises. If no one wants long-term U.S. debt, who will take over it? Long-term U.S. Treasury yields can only continue to climb.

## Deadline distortion is not a long-term solution Don’t think that this term structure of taking the short term and discarding the long term is healthy. As investors, have we never seen the overnight government bond repurchase rate occasionally rise to double-digit levels?

Ultra-long-term Treasury bonds are a sufficiently safe and stable liability for the U.S. government. It does not need to worry about short-term debt repayment pressure and debt repayment interest rates. If the U.S. government really wants to reduce its debt, a healthy approach would be to push short-term debt into the long term.

Once buyers and sellers in the market begin to pursue short-term Treasury bonds (T-Bills) with a maturity of one year (inclusive), it will be safe for creditors, but not necessarily for debtors. We can even simply and crudely regard the duration of the U.S. debt as the (theoretical) duration of the U.S. government's opening and existence.

This state of serious deviation of short-term and long-term interest rates can basically be regarded as The market feels that the future of the U.S. government is in danger and is only willing to hold U.S. debt with a maturity of less than one year. Long-term U.S. debt and debt have been sold off. In this way, long-term U.S.

debt may become a powder keg for the next financial crisis.

Full text

#Fed8: The surge in long-term U.S.

#Fed8: The surge in long-term U.S. bond yields may become a powder keg for the next financial crisis ## U.S. long-term bond yields cannot be lowered The bottom line is that from the market's perspective: The U.S. government has huge long-term problems. The def

#Fed8: The surge in long-term U.S. bond yields may become a powder keg for the next financial crisis ## U.S. long-term bond yields cannot be lowered The bottom line is that from the market's perspective: The U.S. government has huge long-term problems. The deficit is increasing year by year, the interest cannot be covered, and the issuance of national debt continues. The U.S. industry faces huge long-term problems. Without the support of its own industrial advantages, inflation will inevitably occur in the long run. The U.S. dollar has a big long-term problem. There is no industrial support and huge government spending. Can the Federal Reserve really make that green dollar knife encrusted with gold? In 1973, the United States had already torn off this golden rim from the US dollar. ## 1/Inflation expectations The Fed now mainly looks at personal consumption expenditures (PCE) for inflation. Although the current PCE index in April is around 3.8% year-on-year, which is in line with market expectations, that is to say, there is no "expectation" of severe inflation. There are obviously signs of "head tilting". (Thanks to the public account: Danhu Fisherman, infringement deleted) Wash said that he prefers to look at the censored mean PCE data. From this data alone, it is still trending flat, so there is no need to panic. AI is in full swing, The non-farm employment data exceeded expectations, but judging from the U.S. per capita income and the U.S. personal savings rate, the data continued to decline. The long-term K-shaped economic pattern in the United States is also taking shape. The U.S.-led AI industry chain (Hynix + Samsung + TSMC + Nvidia) is at its peak, and it is indeed making real money right now, but is this a competitive advantage that can maintain a monopoly in the long term? uncertain. We still firmly believe that China’s AI industry chain will bring chips and storage to cabbage prices, and will also drive tokens to cabbage prices. Once the industrial chain controlled by the United States loses its competitive advantage, local inflation will be inevitable. ## 2/Rapidly Deteriorating U.S. Finances Long-term U.S. bond yields remain high, but what everyone is really afraid of is not inflation, but another pre-problem of inflation: poor U.S. finances. In May 2025, Moody's downgraded the U.S. credit rating from the highest level Aaa to the next lower level Aa1. In the past ten years, the average size of the U.S. government's deficit has been approximately US$1.56 trillion. In the past five years, this size has risen to 1.9 trillion, with the highest deficit reaching 3.13 trillion in 2020. This kind of deficit has long been a normal phenomenon. Even under an optimistic economic environment in 2025, the deficit will still be as high as about 1.8 trillion US dollars, accounting for nearly 6% of GDP. The main spending direction of the deficit has shifted to long-term structural directions such as soaring interest payments, rigid growth of statutory benefits, and erosion of the tax base. The average annual fiscal revenue of the United States over the past five years has been less than US$5 trillion. The total amount of existing U.S. debt has reached 38 trillion U.S. dollars, which means that interest payments may account for a very large proportion of federal fiscal revenue. At present, this proportion has reached 19%. This means that for every dollar the government collects in taxes, nearly 20 cents goes directly to pay interest on the debt. This ratio will still be around 9% in 2021. The reason is the rapid expansion of the scale of national debt and the sharp rise in national debt interest rates. In fiscal year 2026, net interest payments on the federal debt are expected to exceed $1 trillion, exceeding the annual defense budget for the first time in history and becoming one of the largest single expenditures in the federal finance. This means that the maintenance of financial hegemony may begin to lose its support for military hegemony. In September 2025, the weighted interest rate burden of the U.S. government is approximately 3.25%. As the proportion of medium- and long-term U.S. bonds issued during the high-interest cycle increases, this is expected to rise to more than 3.4% in fiscal year 2026. This level is already more than double the historical low of 1.5% before the 2022 interest rate hike cycle. Gross estimates estimate that by 2036, U.S. fiscal revenue may not be enough to pay interest on U.S. debt. ## 3/The U.S. government still (helplessly) has to increase the supply of national debt. The issuance of U.S. Treasury bonds is generally divided into total issuance and net issuance. We know the net issuance, and the total issuance includes maturity refinancing. The total issuance volume in 2025 will be approximately US$31 trillion, equivalent to 110% of GDP. Net issuance exceeds $2 trillion. In order to avoid high-interest long-term bonds (more than 10 years), the new long-term Treasury bonds issued by the U.S. government in 2025 will only account for about 1.6% of the total. The one-year (inclusive) short-term government bonds (T-Bills) reached 85% , through such short-term and long-term issuances, the proportion of the stock of long-term government bonds is continuously diluted. Currently, this proportion is diluted to about 17%. The short hair is still long, the US government interest rate is cheaper. Buy short and sell long, and the Fed's body has become flexible. But the problem arises. If no one wants long-term U.S. debt, who will take over it? Long-term U.S. Treasury yields can only continue to climb. ## Deadline distortion is not a long-term solution Don’t think that this term structure of taking the short term and discarding the long term is healthy. As investors, have we never seen the overnight government bond repurchase rate occasionally rise to double-digit levels? Ultra-long-term Treasury bonds are a sufficiently safe and stable liability for the U.S. government. It does not need to worry about short-term debt repayment pressure and debt repayment interest rates. If the U.S. government really wants to reduce its debt, a healthy approach would be to push short-term debt into the long term. Once buyers and sellers in the market begin to pursue short-term Treasury bonds (T-Bills) with a maturity of one year (inclusive), it will be safe for creditors, but not necessarily for debtors. We can even simply and crudely regard the duration of the U.S. debt as the (theoretical) duration of the U.S. government's opening and existence. This state of serious deviation of short-term and long-term interest rates can basically be regarded as The market feels that the future of the U.S. government is in danger and is only willing to hold U.S. debt with a maturity of less than one year. Long-term U.S. debt and debt have been sold off. In this way, long-term U.S. debt may become a powder keg for the next financial crisis.

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