Bond Shortage Deepens as US Treasury Stops Issuing Debt

Alexander Hamilton outside the US Treasury. He created the US federal debt after the Revolutionary War

by Ambrose Evans-Pritchard

The US government paid off more debt than it issued last month in a stunning turn-around for America’s public finances, causing an acute shortage of bonds and a further downward slide in borrowing costs.

Net issuance of notes and bonds by the US Treasury plunged below zero in April as tax revenues surged, a feat last achieved for fleeting moments at the end of the global economic boom in 2008.

The dramatic improvement comes as US federal spending settles at 20.5pc of GDP, down from 24.5pc after the Lehman crisis, and roughly comparable to where it was at the end of the Reagan era in the 1980s.

America’s $19 trillion of existing debt is no longer enough to satisfy voracious demand from investors, forcing them to accept ever lower returns.

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