More than 1 in 5 US tax dollars now goes to interest on the national debt, while the 10-year Treasury yield sits near a 24-year high. That surge has yet to fully reach the federal budget.
The Congressional Budget Office (CBO) estimates net interest topped $1.1 trillion in the fiscal year that ended Sept. 30, up $115 billion, or 11%. Yet much of this year’s yield jump is not in that bill, The Wall Street Journal reported.
Why Hasn’t the Yield Spike Hit the Budget Yet?
Treasury yields set what Washington pays on new borrowing. The 10-year touched 5.35% on Oct. 7, its highest since 2002, CNBC reported, and has gained about 60 basis points since late July. A basis point equals 0.01 percentage points.
However, the average rate on all marketable Treasury debt was 3.475% in August, up from 3.415% a year earlier, a Joint Economic Committee (JEC) debt update showed.
That sits well below the 5.3% the Treasury paid at Wednesday’s $39 billion 10-year note auction, the highest auction yield since 2000. Yields slipped to about 5.29% afterward on solid demand.
Roughly 33% of marketable debt matures within 12 months, the JEC update showed, so the average cost could climb as that debt is refinanced at higher yields.
Can Washington Slow the Bill Before It Climbs?
The average rate rose only 0.06 percentage points over the year, suggesting the 11% jump in interest reflects a bigger debt pile more than higher rates.
Policymakers can do little about interest directly. The CBO put the fiscal 2026 deficit at $1.993 trillion, 12% above a year earlier, as spending rose 6% and revenue rose 3%.
Markets are weighing how rising bond yields affect stocks, while a weak September jobs report has eased concern about another Fed rate hike.
Neither party has prioritized deficit reduction before the midterms. President Donald Trump has promised $5,000 checks for adults if Republicans keep Congress, a plan costing over $1 trillion that would likely be borrowed.
With the deficit near 6% of gross domestic product (GDP) in a growing economy, the gap between old and new borrowing costs may limit the next Congress’s options.
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