The level of government debt outstanding limits how much the Fed can raise rates. With total debt held by the public at $24.3trn, the 2% increase in the entire yield curve over the past six months will increase debt servicing costs by $486bn, see chart below. With net interest expenses expected on government debt in FY2023 at $442bn, the total annual debt servicing costs would rise to roughly $1trn. The bottom line for markets is that rising interest rates are becoming a significant drag on US GDP growth. For more, see also links here: Debt to the Penny, Interest Expense on the Debt Outstanding and CBO projections.
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