Investing General Discussion

Sanrith Descartes said:

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Sanrith Descartes said:

"technically" that isn't the Feds job to care about. Congress borrowing fucktons of money to pay people to not work isn't the Fed's problem. Paul Volcker would be probably be like "Fuck you bitches, not my problem."

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Sanrith Descartes said:

In come the FED minutes and down go the stonks.

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Sanrith Descartes said:

This is long AF, so spoilered for length. the tldr answer is had the Fed cut rates today by 25 basis points the maturing debt remaining in 2025 would have saved $4.25 billion annually in borrowing costs on the $1.7 trillion that is maturing the rest of the year.

Spoiler: Length

To address your query, I’ll break it down into three parts: (1) calculating the U.S. debt maturing between July 30, 2025, and December 31, 2025, (2) determining the difference between the maturing coupon rates and today’s rates to estimate the change in borrowing costs, and (3) recalculating the borrowing costs assuming a 25 basis point (0.25%) cut in the federal funds rate. Let’s dive in.1. U.S. Debt Maturing Between July 30, 2025, and December 31, 2025The U.S. Treasury Department provides detailed data on outstanding marketable debt, including Treasury bills, notes, bonds, and TIPS (Treasury Inflation-Protected Securities), through its Monthly Statement of the Public Debt (MSPD) and other resources like TreasuryDirect. Marketable debt is relevant here as it includes securities traded in secondary markets with fixed coupon rates and maturities.Based on available data, I’ll estimate the amount of marketable U.S. debt maturing in the specified period (July 30, 2025, to December 31, 2025). The Treasury’s Debt to the Penny data and auction schedules indicate the total public debt outstanding as of June 30, 2025, was approximately $35.1 trillion, with marketable debt comprising about 97% (roughly $34 trillion). However, only a portion of this debt matures within the specified timeframe.Treasury Securities Maturing in 2025 (Post-July 30)Treasury Bills (T-Bills): These are short-term securities with maturities of one year or less. T-Bills are issued weekly (4-week, 8-week, 13-week, 26-week) and monthly (52-week). Based on Treasury auction schedules, T-Bills maturing between August 1, 2025, and December 31, 2025, include:Weekly auctions of 4-week, 8-week, and 13-week bills, with an average monthly issuance of approximately $200–250 billion.
Monthly 26-week and 52-week bills, with roughly $50–70 billion per auction.
Estimating for the 5-month period (August–December), approximately $1.2–1.5 trillion in T-Bills will mature, based on historical issuance patterns and rollovers.

Treasury Notes and Bonds: These have longer maturities (2–10 years for notes, 20–30 years for bonds). Using TreasuryDirect’s redemption tables and MSPD data, notes maturing in late 2025 include:2-year and 5-year notes issued in 2023 and 2020, respectively. For example, August 2025 sees about $70 billion in 2-year notes and $50 billion in 5-year notes maturing.
Total notes and bonds maturing from August to December 2025 are estimated at $300–400 billion, based on monthly redemption data.

TIPS: TIPS mature less frequently, with roughly $20–30 billion maturing in October 2025.

Total Debt Maturing: Combining these, approximately $1.5–1.9 trillion in marketable debt (T-Bills: $1.2–1.5 trillion, Notes/Bonds: $300–400 billion, TIPS: $20–30 billion) is expected to mature between July 30, 2025, and December 31, 2025. For precision, I’ll use a midpoint estimate of $1.7 trillion for calculations.2. Difference Between Maturing Coupon Rates and Today’s RatesTo calculate the increase in borrowing costs, we need the coupon rates of the maturing debt and today’s equivalent rates for new issuances to refinance this debt. The federal funds rate influences short-term rates (e.g., T-Bills), while longer-term Treasury yields (e.g., 2-year, 5-year, 10-year) are market-driven but correlated with Fed policy.Current Rates (as of July 30, 2025)Federal Funds Rate: As of June 2025, the effective federal funds rate (EFFR) is in the range of 4.25%–4.50%, with the latest data suggesting an EFFR of approximately 4.33% (per Federal Reserve data).

Treasury Yields (per Treasury’s Daily Yield Curve, July 2025 estimates):3-month T-Bill: ~4.3% (aligned with EFFR, slightly lower due to market dynamics).

2-year Treasury: ~4.1% (fluctuating around 4.0–4.2%).

5-year Treasury: ~4.3% (slightly higher than 2-year).

10-year Treasury: ~4.25% (recently down from 4.39%).

For simplicity, I’ll use a weighted average current yield of 4.3% for refinancing, reflecting the mix of short-term (T-Bills) and medium-term (notes) debt.

Coupon Rates of Maturing DebtT-Bills: These are discount securities without coupon rates, but their yield at issuance approximates the federal funds rate at the time. T-Bills maturing in late 2025 were issued in early 2025 or late 2024, when the EFFR was 4.5%–5.0% (post-September 2024 cuts). Assume an average issuance yield of 4.7%.
Treasury Notes: Notes maturing in 2025 (e.g., 2-year notes from 2023, 5-year notes from 2020) have coupon rates reflecting the low-rate environment post-COVID or earlier hikes:2-year notes (issued 2023): Coupon rates around 4.5%–5.0% (reflecting 2023’s higher rates).
5-year notes (issued 2020): Coupon rates around 0.5%–1.5% (low-rate environment).
Weighted average coupon rate for notes: ~3.0% (higher for newer 2-year notes, lower for older 5-year notes).

TIPS: Coupon rates are lower (e.g., 0.125%–1.0%), but inflation adjustments complicate direct comparisons. Assume an effective coupon of ~1.5%.
Weighted Average Coupon Rate: Given T-Bills dominate ($1.2–1.5 trillion) versus notes ($300–400 billion) and TIPS ($20–30 billion), the overall average coupon rate for maturing debt is approximately 4.3% (T-Bills at 4.7%, notes at 3.0%, TIPS at 1.5%, weighted by amount).

Difference in RatesMaturing coupon rate (weighted average): 4.3%
Current yield for refinancing: 4.3%
Difference: 4.3% – 4.3% = 0% (negligible difference).

Borrowing Cost Impact: The cost to refinance $1.7 trillion at current rates versus maturing rates is:Annual interest cost at maturing rates: $1.7 trillion × 4.3% = $73.1 billion.
Annual interest cost at current rates: $1.7 trillion × 4.3% = $73.1 billion.
Increase in borrowing costs: $0 billion (no change, as rates are effectively equal).

This suggests that, based on current data, borrowing costs for debt maturing in late 2025 remain flat when refinanced at today’s rates, primarily because recent Fed rate cuts have aligned current yields with those of debt issued in 2023–2024.3. Impact of a 25 Basis Point Fed Rate CutAssume the Fed lowers the federal funds rate by 25 basis points today (July 30, 2025), reducing the EFFR from 4.33% to 4.08% (target range 4.0%–4.25%). Treasury yields typically adjust downward with Fed cuts, though the effect diminishes for longer maturities. Based on historical patterns (e.g.,), a 25-basis-point cut reduces short-term yields (T-Bills) by ~20–25 basis points and longer-term yields (2-year, 5-year) by ~10–15 basis points.

Adjusted Rates Post-Cut3-month T-Bill: 4.3% → 4.05% (25 bps reduction).
2-year Treasury: 4.1% → 3.95% (15 bps reduction).
5-year Treasury: 4.3% → 4.15% (15 bps reduction).
Weighted average refinancing yield: ~4.05% (reflecting the mix of securities).

Recalculated Borrowing CostsMaturing coupon rate: 4.3%.
New refinancing yield (post-cut): 4.05%.
Difference: 4.3% – 4.05% = 0.25% (25 basis points).
Annual interest cost at maturing rates: $1.7 trillion × 4.3% = $73.1 billion.
Annual interest cost at new rates: $1.7 trillion × 4.05% = $68.85 billion.
Decrease in borrowing costs: $73.1 billion – $68.85 billion = $4.25 billion annually.

SummaryDebt Maturing (July 30–Dec 31, 2025): Approximately $1.7 trillion.
Current Borrowing Cost Impact: No increase ($0 billion), as maturing coupon rates (4.3%) match current refinancing yields (4.3%).
Post-25 bps Cut Borrowing Cost Impact: A savings of $4.25 billion annually, as refinancing yields drop to 4.05%.

Notesata limitations (e.g., exact maturities and coupon rates) required estimates based on Treasury schedules and historical yields. For precise figures, consult TreasuryDirect’s redemption tables or MSPD.
T-Bill yields are sensitive to Fed policy, while note yields depend on market expectations, introducing some uncertainty.
If you need a detailed breakdown by specific security or month, I can refine the estimate with additional data.

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