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Barry Ritholtz

Chance for Smart U.S. Debt Funding Is Slipping Away

Interest rates are rising and the country should act now to lock in cheap financing.
You can't get there from here.

You can't get there from here.

Photographer: Yoon S. byun/boston globe/getty images

Yesterday’s decision by the Federal Reserve to raise its benchmark interest rate by a quarter-point -- likely the first of three this year -- served as a reminder that when it comes to financing America’s long-term debt, the U.S. is doing it all wrong. Even worse, the time to correct these errors is slowly slipping away.

As we should have learned during the financial crisis, matching the maturities of the U.S.'s funding requirements and its credit sources is crucial. Rolling over low-interest short-term loans every 90 days to fund longer-term liabilities seems like a cheaper financing method -- right up until the moment where short-term credit is no longer available. That’s when, as we saw in late 2008, companies such General Election Co. and Ford Motor Co. suddenly realized that they might not make payroll.