The difficulties facing U.S. government bonds can be analyzed from four perspectives: fiscal, economic, market, and political:

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1. Surging interest expenditure pressure

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

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

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

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2. Persistent high deficits, making fiscal consolidation difficult

• The annual budget deficit still exceeds $1.5 trillion, while there are disagreements in Congress on tax reform and spending cuts.

• Even with economic growth, the U.S. government is unable to balance revenues and expenditures. If a recession occurs, falling tax revenues and rising expenditures will cause debt to surge.

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3. Risk of credit rating downgrades and confidence crisis

• Moody's has downgraded the U.S. sovereign debt credit rating from Aaa to Aa1; if the deficit continues without improvement, it may be downgraded again in the future.

• A downgrade in ratings could lead to increased borrowing costs, investors seeking safety, and may even shake international confidence in the U.S. dollar.

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4. Weakening market demand for bonds

• Major overseas buyers like Japan and China are reducing their holdings of U.S. 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 interest rates to suppress inflation, it will increase borrowing costs and interest expenditures.

• If it lowers interest rates to stimulate the economy, it may reignite inflation, creating a dilemma and adding uncertainty to the bond market.

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6. Political gridlock and debt ceiling crisis

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