{"id":32046,"date":"2026-08-07T09:12:27","date_gmt":"2026-08-07T07:12:27","guid":{"rendered":"https:\/\/michelsanti.fr\/?p=32046"},"modified":"2026-08-07T09:12:27","modified_gmt":"2026-08-07T07:12:27","slug":"fixed-rate-in-paris-adjustable-rate-in-washington","status":"publish","type":"post","link":"https:\/\/michelsanti.fr\/en\/public-debt\/fixed-rate-in-paris-adjustable-rate-in-washington","title":{"rendered":"Fixed Rate in Paris, Adjustable Rate in Washington"},"content":{"rendered":"

\"\"<\/p>\n

 <\/p>\n

A household rejects a fixed-rate loan as too expensive and opts for a variable rate instead. It immediately saves 1.2 percentage points\u2014provided interest rates do not rise.<\/p>\n

In many respects, that is precisely what the US government is doing.<\/p>\n

The numbers add up<\/h2>\n

As of August 4, 2026, borrowing for one year costs approximately 4.00% in the United States. Borrowing for thirty years costs around 5.20%. That is a difference of 120 basis points.<\/p>\n

Across hundreds of billions of dollars, the immediate savings amount to billions in interest. The calculation is tempting in a budget where debt service already absorbs 18.5% of federal revenue.<\/p>\n

No debt manager would turn down such a short-term saving. Nor did the Treasury.<\/p>\n

Documents released for the third quarter of 2026 project $739 billion in privately held net marketable borrowing. Alongside that figure, the issuance tables show approximately $375 billion in coupon-bearing securities and $409 billion in short-term Treasury bills. These amounts cannot simply be added together, because they do not cover the same accounting scope as quarterly net borrowing. Source<\/a><\/p>\n

The message nevertheless remains clear: a substantial share of US financing relies on securities whose cost will soon be repriced by the market.<\/strong><\/p>\n

Repeated for long enough, this strategy transforms the structure of the risk<\/em>.<\/p>\n

As of July 31, 2026, Treasury bills with maturities of less than one year account for approximately $7 trillion, or nearly 22.2% of marketable debt held by the public. Source<\/a><\/p>\n

Creditors have sounded the warning<\/h2>\n

Since 2020, the Treasury Borrowing Advisory Committee<\/em> has recommended that the Treasury keep bills within a range of 15% to 20% of marketable debt. The committee brings together professionals from major banks, investment funds and bond markets. It advises the Treasury quarterly, and its reasoning has remained consistent: bills often cost less in the short term, but they expose the budget to a rapid rise in interest rates. Such an increase would feed through progressively with each refinancing, rather than being held at bay by locking in medium- or long-term funding.<\/p>\n

The proposed solution is not necessarily to finance everything for thirty years. Rather, it is to increase the share of intermediate maturities\u2014two or three years, for example\u2014in order to reduce dependence on maturities of just a few weeks or months.<\/p>\n

A three-month bill matures and must be refinanced quickly. A three-year note provides greater visibility: its coupon is fixed for the next three years.<\/p>\n

That protection, however, comes at a price. Under normal conditions, yields on two- or three-year securities may exceed bill yields by several dozen basis points. That additional yield pays for a form of protection against refinancing risk. It is obviously not free insurance, since it incorporates interest-rate expectations and the term premium.<\/p>\n

The US Treasury is therefore accepting an immediate saving in return for greater exposure to future interest-rate increases.<\/em><\/p>\n

The average conceals the risk<\/h2>\n

One might object that US debt is not particularly short-dated and that its weighted average maturity is approximately six years. True. But an average combines maturities with very different risk profiles.<\/p>\n

A debt stock composed partly of bills and partly of ten-, twenty- or thirty-year securities can display a high average maturity while remaining heavily exposed to short-term refinancing. The risk therefore depends not only on the average, but necessarily on the precise distribution of maturities<\/em>.<\/p>\n

That said, the United States does not have half of its debt in three-month paper. Although relatively high, the share of bills remains around one-fifth of marketable debt\u2014not one-half.<\/p>\n

The issue, therefore, is not that US debt is entirely \u201cfloating-rate,\u201d but that its short-term share is large enough for higher interest rates to feed rapidly into the federal budget.<\/p>\n

Paris made a different choice<\/h2>\n

France has favoured longer maturities. The average maturity of French government marketable debt is around eight and a half years\u2014more precisely, eight years and 180 days as of June 30, 2026. Source<\/a><\/p>\n

This does not mean that exactly one-eighth of the debt returns to the market each year: an average alone can never describe the actual maturity schedule. Nevertheless, this structure slows the transmission of an interest-rate shock to the public finances.<\/p>\n

For illustration, if we assume that the debt is refinanced gradually and that interest rates rise uniformly by 100 basis points, the additional interest burden could reach approximately \u20ac3.1 billion in the first year, then accumulate to around \u20ac32.1 billion by the end of a decade. These figures are the result of a simulation, not a forecast, and assume, in particular, a stable debt stock and an even distribution of refinancing.<\/p>\n

Yet this protection has a price: France\u2019s projected debt-interest bill for 2026 is \u20ac59.3 billion\u2014more than the budgets of many core government functions.<\/p>\n

France therefore knows the price of its insurance.<\/p>\n

America\u2019s risk<\/h2>\n

Washington is currently enjoying the short-term funding discount, paying less interest than it would if it locked in all its borrowing at long maturities.<\/p>\n

In return, the budget becomes more sensitive to the path of interest rates. A sustained increase would not hit the entire debt stock on the same day, but would spread rapidly with each rollover of Treasury bills.<\/p>\n

A borrower who does not hedge is not necessarily wrong. If interest rates fall, or remain stable for a prolonged period, preferring short-term funding will have proved to be the right decision.<\/p>\n

Yet this strategy ceases to be a mere debt-management choice once exposure to short-term rates reaches several trillion dollars. It becomes a macroeconomic decision\u2014one that must be politically owned\u2014and deserves to be explicitly set out in budget documents.<\/p>\n

The problem is not that the United States borrows at short maturities. It is that US policymakers do not clearly disclose the price of the risk they are taking.<\/p>\n","protected":false},"excerpt":{"rendered":"

  A household rejects a fixed-rate loan as too expensive and opts for a variable rate instead. It immediately saves 1.2 percentage points\u2014provided interest rates do not rise. In many respects, that is precisely what the US government is doing. The numbers add up As of August 4, 2026, borrowing for one year costs approximately…<\/p>\n","protected":false},"author":4,"featured_media":32051,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"give_campaign_id":0,"_exactmetrics_skip_tracking":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_wpcom_ai_launchpad_first_post":false,"mc4wp_mailchimp_campaign":[],"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"{title}\n\n{excerpt}\n\n{url}","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"_wpas_customize_per_network":false,"jetpack_post_was_ever_published":false},"categories":[648943423,648943424,648943422],"tags":[],"class_list":["post-32046","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-floating-rate","category-interest-rate-risk","category-public-debt"],"yoast_head":"\nFixed Rate in Paris, Adjustable Rate in Washington - Michel Santi<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/michelsanti.fr\/en\/public-debt\/fixed-rate-in-paris-adjustable-rate-in-washington\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Fixed Rate in Paris, Adjustable Rate in Washington - Michel Santi\" \/>\n<meta property=\"og:description\" content=\"  A household rejects a fixed-rate loan as too expensive and opts for a variable rate instead. 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Trapped in a model inherited from the 19th century, France will need to refinance itself next year to the tune of just over \u20ac300 billion\u2014a complex and risky exercise.\u2026","rel":"","context":"In "french public debt"","block_context":{"text":"french public debt","link":"https:\/\/michelsanti.fr\/en\/category\/french-public-debt"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2025\/11\/Claude_Lefebvre_-_Detail_of_Portrait_of_Jean_Baptiste_Jean-Baptiste_Colbert_1619-1683_Ministe_-_MeisterDrucke-982380.jpg?fit=1020%2C1200&ssl=1&resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2025\/11\/Claude_Lefebvre_-_Detail_of_Portrait_of_Jean_Baptiste_Jean-Baptiste_Colbert_1619-1683_Ministe_-_MeisterDrucke-982380.jpg?fit=1020%2C1200&ssl=1&resize=350%2C200 1x, https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2025\/11\/Claude_Lefebvre_-_Detail_of_Portrait_of_Jean_Baptiste_Jean-Baptiste_Colbert_1619-1683_Ministe_-_MeisterDrucke-982380.jpg?fit=1020%2C1200&ssl=1&resize=525%2C300 1.5x, https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2025\/11\/Claude_Lefebvre_-_Detail_of_Portrait_of_Jean_Baptiste_Jean-Baptiste_Colbert_1619-1683_Ministe_-_MeisterDrucke-982380.jpg?fit=1020%2C1200&ssl=1&resize=700%2C400 2x"},"classes":[]},{"id":24036,"url":"https:\/\/michelsanti.fr\/en\/gold-standard\/end-game","url_meta":{"origin":32046,"position":1},"title":"End game","author":"Michel Santi","date":"February 12, 2023","format":false,"excerpt":"\u00a0 The gold standard was a system where the currency of a country was linked to gold and which could materialize either by defining a certain quantity of metal in exchange for the American dollar, or indirectly through currencies having a fixed parity against the greenback. As early as 1944\u2026","rel":"","context":"In "gold standard"","block_context":{"text":"gold standard","link":"https:\/\/michelsanti.fr\/en\/category\/gold-standard"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2023\/02\/creation-monetaire-300x170.png?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":20341,"url":"https:\/\/michelsanti.fr\/en\/capitalism\/700-years-of-interest-rates-to-predict-the-future","url_meta":{"origin":32046,"position":2},"title":"700 years of interest rates to predict the future","author":"Michel Santi","date":"June 8, 2020","format":false,"excerpt":"The bankers of Florence \u2013 the inventors of modern finance \u2013imposed a two-figure interest rate in return for their loans. The usurer Shylock, in Shakespeare\u2019s The Merchant of Venice, was happy with 8%, whereas this service charge on debt had fallen to around 4% at the start of World War\u2026","rel":"","context":"In "capitalism"","block_context":{"text":"capitalism","link":"https:\/\/michelsanti.fr\/en\/category\/capitalism"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2020\/06\/CgyAm_qW4AALCCn.jpg?fit=600%2C450&ssl=1&resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2020\/06\/CgyAm_qW4AALCCn.jpg?fit=600%2C450&ssl=1&resize=350%2C200 1x, https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2020\/06\/CgyAm_qW4AALCCn.jpg?fit=600%2C450&ssl=1&resize=525%2C300 1.5x"},"classes":[]},{"id":29634,"url":"https:\/\/michelsanti.fr\/en\/balance-sheet-reduction\/fed-qt","url_meta":{"origin":32046,"position":3},"title":"The Fed\u2019s Blueprint for Economic Self-Destruction","author":"Michel Santi","date":"June 16, 2025","format":false,"excerpt":"The Federal Reserve (Fed) has launched its quantitative tightening (QT) this June, aiming to reduce its $9 trillion balance sheet at an unprecedented pace of $95 billion per month. Amid the ongoing tariff wars and geopolitical dramas, few are paying attention to the actions of the U.S. central bank \u2013\u2026","rel":"","context":"In "balance sheet reduction"","block_context":{"text":"balance sheet reduction","link":"https:\/\/michelsanti.fr\/en\/category\/balance-sheet-reduction"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2025\/06\/liquidites-robinet.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2025\/06\/liquidites-robinet.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2025\/06\/liquidites-robinet.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2025\/06\/liquidites-robinet.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2025\/06\/liquidites-robinet.jpg?resize=1050%2C600&ssl=1 3x, https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2025\/06\/liquidites-robinet.jpg?resize=1400%2C800&ssl=1 4x"},"classes":[]},{"id":20835,"url":"https:\/\/michelsanti.fr\/en\/debt\/taking-on-debt-yes-but-what-for","url_meta":{"origin":32046,"position":4},"title":"Taking on debt, yes, but what for?","author":"Michel Santi","date":"October 11, 2020","format":false,"excerpt":"Following on from Keynes, it\u2019s been years that I\u2019ve been talking about it and outlining the mechanisms. At present, reality is catching up with the \u201cmainstream\u201d economists who with regret have recognised the absolute necessity for governments to deepen their debts in the current recession brought about by the health\u2026","rel":"","context":"In "debt"","block_context":{"text":"debt","link":"https:\/\/michelsanti.fr\/en\/category\/debt"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2020\/10\/Roosevelt-e-Keynes-1.jpg?fit=600%2C400&ssl=1&resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2020\/10\/Roosevelt-e-Keynes-1.jpg?fit=600%2C400&ssl=1&resize=350%2C200 1x, https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2020\/10\/Roosevelt-e-Keynes-1.jpg?fit=600%2C400&ssl=1&resize=525%2C300 1.5x"},"classes":[]},{"id":22483,"url":"https:\/\/michelsanti.fr\/en\/turkish-lira\/turkey-autopsy-of-a-debacle","url_meta":{"origin":32046,"position":5},"title":"Turkey: autopsy of a debacle","author":"Michel Santi","date":"May 30, 2022","format":false,"excerpt":"\u00a0 This country got lost in grandiose real estate projects that have turned out to be barely profitable. Instead of progressing from its economy\u2019s developmental stage by prioritising and banking on the traditional path\u2013 which is also enticing for foreign investors \u2013, a path that is characterised by gradual industrialisation,\u2026","rel":"","context":"In "Turkish hyperinflation"","block_context":{"text":"Turkish hyperinflation","link":"https:\/\/michelsanti.fr\/en\/category\/turkish-hyperinflation"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2022\/05\/turque-lirvre.jpg?fit=1200%2C801&ssl=1&resize=350%2C200","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2022\/05\/turque-lirvre.jpg?fit=1200%2C801&ssl=1&resize=350%2C200 1x, https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2022\/05\/turque-lirvre.jpg?fit=1200%2C801&ssl=1&resize=525%2C300 1.5x, https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2022\/05\/turque-lirvre.jpg?fit=1200%2C801&ssl=1&resize=700%2C400 2x, https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2022\/05\/turque-lirvre.jpg?fit=1200%2C801&ssl=1&resize=1050%2C600 3x"},"classes":[]}],"amp_enabled":true,"jetpack_featured_media_url":"https:\/\/i0.wp.com\/michelsanti.fr\/wp-content\/uploads\/2026\/08\/santi-eng.jpg?fit=1900%2C1037&ssl=1","_links":{"self":[{"href":"https:\/\/michelsanti.fr\/en\/wp-json\/wp\/v2\/posts\/32046","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/michelsanti.fr\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/michelsanti.fr\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/michelsanti.fr\/en\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/michelsanti.fr\/en\/wp-json\/wp\/v2\/comments?post=32046"}],"version-history":[{"count":4,"href":"https:\/\/michelsanti.fr\/en\/wp-json\/wp\/v2\/posts\/32046\/revisions"}],"predecessor-version":[{"id":32060,"href":"https:\/\/michelsanti.fr\/en\/wp-json\/wp\/v2\/posts\/32046\/revisions\/32060"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/michelsanti.fr\/en\/wp-json\/wp\/v2\/media\/32051"}],"wp:attachment":[{"href":"https:\/\/michelsanti.fr\/en\/wp-json\/wp\/v2\/media?parent=32046"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/michelsanti.fr\/en\/wp-json\/wp\/v2\/categories?post=32046"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/michelsanti.fr\/en\/wp-json\/wp\/v2\/tags?post=32046"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}