US federal interest expense reaches record 18.5% of revenue amid soaring debt servicing costs and elevated Treasury yields.
Macro & Markets ·
US federal interest expense has reached a record 18.5% of government revenue, surpassing the previous peak of 18.4% set in 1991. The annual interest bill now totals $1.25 trillion, more than quadrupling over the past four years as debt servicing costs have accelerated. The 30-year Treasury yield currently trades near 5.21%, sitting just 13 basis points below its highest level since 2007—a notably lower rate than the roughly 8.00% yield observed in 1991, illustrating how the composition and scale of the debt burden have shifted.
The spike in interest-to-revenue ratio reflects both elevated Treasury yields and the expanding stock of outstanding US debt. Even as nominal yields remain below historical peaks, the absolute volume of debt means that servicing costs now consume nearly one-fifth of all federal revenue, crowding out spending on other priorities.
What remains uncertain is whether yields will climb further toward 2007 highs or stabilize at current levels, and how policymakers will respond to the structural constraint that rising interest costs impose on fiscal flexibility.