US Government Debt Interest Payments Surge Amid Rising Federal Revenues

Summary

  • With an increase of 9% from a year earlier, federal revenues for the month of November expanded to $275 billion.
  • Outlays significantly soared by $88 billion, reaching a total of $589 billion – a rise of 18% compared to the previous year.
  • The hike in borrowing costs by the Federal Reserve since March 2022 has led to a spike in debt service expenses.
  • Main outlay included $122 billion earmarked for Social Security payments each month, and the $80 billion that was spent on interest on the debt, surpassing the $66 billion allocated for national defence.
  • The Treasury’s year-to-date deficit for fiscal 2024 has seen an increase of 13% to $381 billion against $336 billion for the same period of the preceding year.

Federal Revenues and Outlays

In November, federal revenues experienced an upswing of $23 billion, settling at $275 billion – a growth of 9% when compared to the previous year. On the other hand, outlays saw a substantial leap, increasing by $88 billion and reaching $589 billion, 18% more than the amounts reported a year ago. A considerable $25 billion of this increment stemmed from interest payments on US government debt.

Debt Service Costs

Since the Federal Reserve started hiking borrowing fees in March 2022 to contain inflation, debt service expenses have significantly risen. The benchmark overnight interest rate was increased by 5.25 percentage points, resulting in a surge.

Government Expenditure Details

Government costs on interest of the debt in November stood at $80 billion, outpacing the $66 billion earmarked for national defence- an increase of $8 billion from a year ago. The Medicare health insurance program, run by the government, saw its outlay heighten by $8 billion, taking it to $93 billion. Government-run Medicaid program for the poor and disabled observed a rise of $2 billion, standing at a total of $50 billion.

Deficit and Interest Rates

The biggest expenditure was the $122 billion spent on monthly Social Security payments. November witnessed the weighted average interest rate on the $26 trillion of outstanding Treasury securities balloon to 3.10% from 2.22% in the previous year. Consequently, the Treasury’s year-to-date deficit for fiscal 2024 burgeoned by 13% to $381 billion, as compared to $336 billion the year prior.

Impact on Forex and Trading

These financial developments can potentially affect the Forex market and trading dynamics, possibly leading to fluctuations in the value of US assets.

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