David Hagee, Executive Vice President, Chief Investment Officer
The One Big Beautiful Bill Act (OBBBA) comes with short-term benefits, including what we expect to be a moderate boost in gross domestic product (GDP) late this year and into 2026. However, it also continues deficit spending for the life of the Act. The continued spending will accelerate the U.S. deficit and push the deficit to 120% of GDP by 2030.
Revenues, Outlays, Deficits, Surpluses,
and Debt Held by the Public Since 1972, as a Share of GDP
Increased deficit spending leads to higher interest
As deficit spending increases, the U.S. Treasury is required to issue more securities to fund the deficit every year. As supply continues to increase over time and demand remains constant, the amount of term premium or additional interest required to sell bonds could increase up to 40 basis points (bps) over the next 10 years. We anticipate longer-term Treasury rates will remain elevated, offering additional yield for investors. Additional deficits and higher borrowing costs will increase the amount of interest the government has to pay giving it less flexibility in the future. The higher Treasury rates will continue to be a strong influence on the health of the U.S. fiscal picture and economy.
Past performance is no guarantee of future results, and the opinions and other information in the commentary are as of October 1, 2025. This summary is
intended to provide general information only and is reflective of the opinions of Commerce Trust. This material is not a recommendation of any particular security,
is not based on any particular financial situation or need and is not intended to replace the advice of a qualified attorney, tax advisor or investment professional.
Diversification does not guarantee a profit or protect against all risk. Commerce Trust does not provide tax advice or legal advice to customers. Consult a tax
specialist regarding tax implications related to any product and specific financial situation. Data contained herein from third-party providers is obtained from what
are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.
Commerce Trust is a division of Commerce Bank.
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