Why Dosn’t U.S. Take Advantage of Low Rates?


Source: Office of Debt Management, Fiscal Year 2013 Q4 Report

 

The recent chaos in emerging markets has driven investors into U.S. Treasuries. The flight to safety has helped push down interest rates, with the yield on the 10-year bond now 2.6 percent. Although that is higher than the 1.5 percent of last summer, it is considerably lower than the 3 percent the 10 year yielded last month.

This decrease in rates creates another opportunity — perhaps the last one for this rate cycle — for Uncle Sam to borrow. A broad assortment of long-term projects requires attention and low rates make it the ideal time to renovate America’s decaying infrastructure.

Indeed, this is quite significant, especially when you consider how we fund the U.S. budget deficit. According to a recent Treasury report, the average maturity of U.S. debt is 66.7 months (see Fiscal Year 2013 Q4 Report).

 

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