Net interest payments on US federal debt rose 8% to $1.05tn in fiscal 2026, outpacing growth in spending, revenue and GDP, and now exceed $2.9bn a day. With debt at 40tn and yields above CBO forecasts, analysts warn of a spiralling fiscal crisis.
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01Summary
- 01The federal budget deficit widened to $1.99tn in fiscal 2026, 12% worse than the $1.78tn gap in fiscal 2025.
- 02Net interest payments rose 8% to $1.05tn, faster than the 3% revenue increase to $5.4tn and 6% spending rise to $7.4tn.
- 03The average interest rate on federal debt was 3.53% in fiscal 2026, more than double the rate in 2021.
- 04About $10tn of publicly held debt matures in the next 12 months and must be refinanced at current higher rates.
- 05The 10-year Treasury yield is above 5%, well above the CBO's 2026 forecast of 4.1%.
02Why it matters
Rising debt interest costs crowd out spending on public services and defence and signal higher future taxes or cuts. With debt at 100% of GDP and yields elevated, even modest changes in interest rates could sharply worsen the government's fiscal position, affecting bond markets and household borrowing costs.
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