The difficulties faced by the United States Treasury bonds in the future can be analyzed from four aspects: finance, economy, market, and politics:

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1. Surge in interest expense pressure

• With the Federal Reserve raising interest rates, the average interest rate of U.S. bonds has increased, raising the costs of new and refinancing debts.

• Interest expenses are projected to exceed $1 trillion by 2025, even surpassing the military budget, becoming the fastest-growing item in the federal budget.

• The burden of interest expenses crowds out other expenditures (education, infrastructure) or forces the government to borrow further, creating a vicious cycle.

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2. Persistently high deficits, fiscal convergence difficult

• The annual budget deficit still exceeds $1.5 trillion, while Congress is divided on tax reform and spending cuts.

• Even with economic growth, the U.S. government still cannot balance income and expenditure. If an economic recession occurs, tax revenues will decline, and expenditures will rise, causing debt to surge.

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3. Risk of credit rating downgrade and confidence crisis

• Moody’s has downgraded the U.S. sovereign credit rating from Aaa to Aa1, and if deficits continue without improvement, it may be downgraded again in the future.

• A downgrade in rating will lead to increased borrowing costs, investors seeking safe havens, and could even undermine the international trust in the U.S. dollar.

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4. Weakening demand for bonds in the market

• Major overseas buyers like Japan and China are reducing their holdings of U.S. Treasury bonds, focusing instead on domestic assets.

• Investors are concerned about the sustainability of long-term debt, demanding higher returns, which raises yields and drags down the stock and housing markets.

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5. Limited policy space for the Federal Reserve

• If the Federal Reserve continues to raise high interest rates to curb inflation, it will increase borrowing costs and interest expenses.

• If it lowers interest rates to stimulate the economy, it may reignite inflation, creating a dilemma that also causes uncertainty in the Treasury bond market.

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6. Political deadlock and debt ceiling crisis

• The U.S. Congress often fails to adjust the debt ceiling or formulate a long-term fiscal roadmap in a timely manner due to partisan disputes.

• Whenever debt ceiling negotiations stall, it could lead to market panic (as seen in 2011 and 2023), damaging credit and stability.