Quick Take:
- Supply tsunami: Roughly $9.2 trillion in Treasuries mature in 2025—one-third of the market and 30 percent of GDP—and with a $1.9 trillion deficit, total issuance tops $10 trillion, most of it front-loaded in the first half.
- Yield outlook: The 10-year yield has risen from last fall's low on supply concerns, and strategists expect a 4 to 5 percent yield range in 2025, unless demand softens.
The bond market is bracing for an extraordinary supply challenge. Roughly $9.2 trillion in U.S. Treasuries—about one-third of all outstanding marketable debt and nearly 30% of U.S. GDP—will mature in 2025, and an estimated 55–60% of it falls due before July. When the Congressional Budget Office adds a $1.9 trillion federal deficit to that stack, gross issuance climbs above $10 trillion—an amount no modern market has absorbed before.
Why should a Canadian borrower take note? Historically, Canadian bond yields tend to have a very high correlation with U.S. yields. Put simply, if Washington pays more to roll its debt, Ottawa and Canadian households usually end up paying more, too.
The bond market is bracing for an extraordinary supply challenge. Treasury records show that $9.2 trillion in marketable debt, about one-third of the entire Treasury market and nearly a third of GDP, matures in 2025, and roughly 55%-60% falls due before July. Layer on the Congressional Budget Office’s (CBO) projected $1.9 trillion FY 2025 deficit, and the government must sell more than $10 trillion in securities this year, a volume no modern market has absorbed before. Because earlier pandemic-era borrowing leaned heavily on short-dated bills, one-third of all outstanding debt turns over every twelve months, making federal financing costs susceptible to every auction.
Yet, the average duration is still long by historical standards. The weighted average maturity sits near seventy-two months, close to a three-decade high, thanks to deliberate “terming out” when rates were near zero. Even so, the share of bills maturing in a year or less has crept back up to about 21 percent, from a low of 15 percent in 2021, underscoring the tension between locking in term funding and preserving flexibility. Longer dated coupon auctions remain capped, so incremental cash needs are being met by bigger bill sales and a new six-week benchmark that debuted in 2024 to smooth the short end.
Big numbers do not end in 2025. The CBO’s February outlook places deficits in a 5 to 7 percent of GDP band for the next decade, adding about $21 trillion in new borrowing through 2034. If current plans hold, debt held by the public swells from roughly $30 trillion today to more than $52 trillion by 2035, driving the debt-to-GDP ratio past 118 percent, well above its post-World War II record. Servicing that debt is getting pricier: net interest outlays ran above $900 billion in FY 2024, approached $950 billion in 2025, and are projected to top $1 trillion in 2026, absorbing ever larger slices of the federal budget.
The Treasury is laddering supply and adding liquidity backstops to manage rollover risk. It aims to keep bills near 20 percent of the portfolio and has restarted regular buybacks, up to $4 billion a week in off-the-run bonds for liquidity support, plus a one-off $59.5 billion around April tax receipts, to smooth cash swings and prevent auction size spikes. So far, auctions have coped: early 2025 bills clear near a 5 percent yield, and most two- to ten-year notes price within a minimal tail.
Still, markets have noticed. As traders penciled in the 2025 deluge last autumn, the ten-year yield jumped from about 3.8 percent to over 4.5 percent, lifting real yields to decade highs. Analysts reckon that every 30-basis point rise in the ten-year adds roughly $1.8 trillion to ten-year interest costs, sharpening the Treasury’s incentive to fund smoothly. With the Federal Reserve running down its balance sheet, the marginal buyer is now a price-sensitive domestic fund or foreign reserve manager; if either cohort balks, yields must rise until the books balance.
So, will the $9 trillion wall force rates sharply higher? Probably not in a disorderly fashion, but it almost certainly anchors yields in a higher range. Most strategists see the ten-year settling somewhere in the 4 to 5 percent band, well above the 2010s norm yet manageable, so long as auctions remain well bid and inflation stays contained. The market’s depth, the Treasury’s laddering tools, and the dollar’s reserve currency status still provide ample cushioning. But with so much debt rolling every year, any stumble in demand, or a fresh policy shock, could push borrowing costs up quickly. In short, the maturity wall is less a crisis trigger than a permanent upward tilt to the U.S. rate structure that investors and policymakers must live with.