The logic behind the wave of US bond issuance

Since 2025, the US treasury bond bond market has ushered in an unprecedented issuance boom: as of June, the total federal government debt has climbed to US $36.22 trillion, accounting for 123% of GDP, far exceeding the international warning line of 60%; The Congressional Budget Office (CBO) predicts that the size of US debt will increase by another $20 trillion in the next decade, and the debt to GDP ratio may exceed 180% by 2050. The issuance wave sweeping the global financial market is not an accidental fiscal emergency, but an inevitable result of the interweaving of multiple factors such as the US economic growth model, monetary system privileges, policy regulation logic, and the global financial landscape. Behind it lies both the operational mechanism of "debt monetization" and the underlying logic of US dollar hegemony, reflecting the deep imbalances in the global financial system.

The imbalance of fiscal revenue and expenditure and the dependence on economic models constitute the core driving force behind the wave of US bond issuance. The United States has long pursued an economic growth model of "low savings, high consumption, and high debt", which inevitably requires huge debts to maintain operation. On the one hand, the US residential sector relies on developed credit markets to maintain high consumption, while the government stimulates economic growth by expanding public spending, forming a dual expansion pattern of "consumption expenditure"; On the other hand, the domestic savings rate of the United States continues to be low, which is difficult to support the huge demand for investment and spending, and can only siphon funds from the world by issuing treasury bond.

The Federal Reserve's "debt monetization" operation provides core support for the issuance of US bonds. As the largest buyer of US treasury bond bonds, the Federal Reserve has built a closed-loop mechanism of "issuance by the Ministry of Finance - purchase by the Federal Reserve - capital return" through the innovation of monetary policy tools, which has become the "sea calming needle" of US bond issuance. In terms of the use of quantitative tools, the Federal Reserve practiced the modern monetary theory (MMT), and took the issuance of treasury bond as the main channel for the release of basic currency - US M2 increased from US $7 trillion 15 years ago to US $21.3 trillion, and the balance of US debt soared from US $10 trillion to US $36 trillion in the same period, with a growth rate of more than 300% between the two, which confirmed the linkage expansion of liquidity and debt scale. In terms of price tool regulation, the Federal Reserve affects the attractiveness of treasury bond bonds through interest rate adjustment: in the economic downturn, interest rate cuts will lower bond issuance costs, the federal benchmark interest rate will fall to 0% during the COVID-19 epidemic, and the yield of 10-year US bonds will fall below 1%.

The privileged position of the US dollar hegemony provides the institutional foundation for global bond issuance. After the collapse of the Bretton Woods system, the US dollar still firmly holds the global "credit standard" position, currently accounting for 63.9% of global foreign exchange reserves, over 50% of international trade settlements, and over 90% of foreign exchange market transactions. This "one coin dominance" pattern has made US bonds the benchmark for "safe assets" in the global financial market. For countries with trade surpluses, holding US dollar treasury bond is an inevitable choice for maintaining and increasing the value of foreign exchange reserves: the huge US dollar reserves accumulated by East Asian manufacturing countries and oil exporting countries need safe investment channels, and they dare not easily sell US bonds - excessive selling will lead to excessive appreciation of their own currencies, inhibit their own exports, and form a "selling paradox".

The wave of US bond issuance is not only a product of internal economic policies in the United States, but also a microcosm of the imbalance in the global financial system. For the United States, excessive reliance on debt expansion will eventually come at a cost. The lack of fiscal discipline and the hidden dangers of excessive currency issuance may trigger financial market turbulence in the future; For countries around the world, getting rid of excessive dependence on US dollar assets and promoting diversification of the international monetary system are the key to reducing debt risk transmission. This continuous issuance wave is not only the pinnacle of the US dollar hegemony, but also the starting point for its rise and fall - the restructuring of the global financial system is quietly brewing in this wave of debt expansion.