Battered bond markets face some debt headaches as 2025 begins | Wilnesh News

As if the 2024 bond meltdown wasn’t bad enough, fixed-income investors will face multiple challenges in the year ahead, including looming concerns about the upcoming maturities of short-term notes.

Nearly $3 trillion in U.S. debt is expected to mature in 2025, much of it short-term debt that the Treasury Department has issued heavily over the past few years.

Since the government is expected to try to lengthen the debt maturities as it rolls over, it could create another headache as the U.S. pays for its debt in recent years if the market isn’t prepared to absorb what is already expected to be a massive issuance of Treasuries. Financing provides the capital.

“If you assume we’re going to have trillion-dollar-plus deficits after 2025, eventually cumulatively, that’s going to overwhelm Treasury issuance,” Tom Tzitzouris, head of fixed income at Strategas Research Partners, told CNBC on Tuesday. “Quack Box.” “

Strategas estimates there is currently $2 trillion in “excess” Treasuries in the $28.2 trillion Treasury market.

“Those funds are going to have to be gradually scooped out and thrown into the majority five- to 10-year part of the curve, which is probably a bigger concern for the market right now than next year’s deficit,” Tzitzouris said.

Typically, the Treasury likes to keep note issuance at more than 20% of total debt. But that share has climbed in recent years amid ongoing debates over the debt ceiling and the budget and the Treasury’s need to immediately raise cash to keep the government running.

2024, Treasury bond issuance According to data from the Securities Industry and Financial Markets Association, as of November, the total financial market was $26.7 trillion, an increase of 28.5% from 2023.

Treasury Secretary Janet Yellen faced criticism earlier this year from congressional Republicans and economist Nouriel Roubini, who accused the Treasury Department of issuing so many bills to keep short-term funding costs low and in an election year. Boost the economy. President-elect Donald Trump’s pick for Treasury secretary Scott Bessant Was also one of the critics.

However, yields have surged since late September, just after the Federal Reserve took the unusual step of cutting its benchmark borrowing rate by half a percentage point.

It’s been a miserable year for the Treasury market as yields and prices move in opposite directions. this iShares 20+ Year Treasury Bond ETF (TLT) Loss of more than 11% in 2024, compared with growth of 23% in the same period S&P 500 Index.

With traders now pricing in smaller rate cuts and investors dealing with a flood of issuances, it could be another challenging year for fixed income.

“Next year’s deficit should actually be significantly lower than in 2024,” Tzitzouris said. “So scooping up and throwing away these bills is more of a concern right now.”