Announcer:
4 Your Money is brought to you by NelsonCorp Wealth Management.
Brandy Auterson-Hurst:
It’s now time for 4 Your Money. We’re joined by John Nelson, financial planner at NelsonCorp Wealth Management. Welcome back, John.
John Nelson:
Thank you for having me, Brandy.
Brandy Auterson-Hurst:
So there’s been a lot of talk about government debt lately. What are you watching on that front right now?
John Nelson:
Yeah. Today, this one’s a little more interesting, but hang with me. I think it’s important. The chart I have with me today is just showing the share of US government borrowing coming from T-bills, which are essentially short-term IOUs that usually come due in a year or less. And what I really want to highlight is that, right now, 85% of the government’s borrowing is in that short-term bucket. That’s close to the highest levels we’ve seen in 20 years. And as you can see in the chart here in the bluish-gray shaded areas, 2008 financial crisis, 2020, 2020 pandemic, you can see how we’re creeping towards those kind of levels again. The difference, though, is that there’s no crisis forcing it. So the implications by leaning this hard into short-term debt, the government’s basically choosing an adjustable-rate option for a huge part of what we owe. And the borrowing costs are very much tied to the Fed’s decisions going forward. Whether those are good or bad, time will tell, but a bigger and bigger piece is tied to that.
Brandy Auterson-Hurst:
Okay. So, what’s the takeaway for viewers at home?
John Nelson:
Yeah. I think being cognizant of that, understanding that we’ve just added one more layer of complexity to the overall in the financial markets, and staying nimble, watching Fed’s decisions and interest rates. We think they’re going to be a part of the storyline in the months and year ahead, not going anywhere anytime soon.
Brandy Auterson-Hurst:
All right. John, thanks for your insight today.
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