Net interest on government debt reached $963 billion in the first 10 months of fiscal year 2026, the Congressional Budget Office said in its August budget update. The figure covers October 2025 through July 2026 and works out to about $3.18 billion a day.
The CBO also said deficits totaled $1.8 trillion over the same stretch, and it lifted its full-year projection to $2.1 trillion. For readers tracking federal borrowing, the numbers show the Treasury paying more each day just to service existing debt before any new spending is added.
Phil Swagel on rates
Phil Swagel said declines in short-term rates partially mitigated the overall rise in interest payments. He also said the debt was larger than it was in the first 10 months of fiscal year 2025 and that higher long-term interest rates contributed to higher interest payments.
That combination points to a simple mechanism: a bigger debt load raises the bill, while long-term borrowing costs push it higher still. The CBO said interest payments on the debt were $117 billion higher than in the same period last year, an increase of 14%.
Scott Bessent and Japan
Scott Bessent said, “A stable yen is not only important for the U.S., but very important for the entire region.” A photo of his to-do list from a cabinet meeting at the end of July included a reminder to buy $5 billion to $10 billion worth of the currency.
Treasury data updated to May 2026 showed that Japan owns $1.14 trillion in U.S. Treasury securities. That matters because Japan is the top holder of those securities, and any change in demand at that scale can feed back into the U.S. Treasury market.
CBO August deficit outlook
The CBO said its updated deficit projection was $200 billion more than the deficit projected in February 2026. Ray Dalio used the phrase “debt-induced heart attack,” and Paul Donovan said, “Policy has not changed, and there is little evidence yen weakness was the result of a speculative.”
The open question is how far interest costs climb if long-term rates stay elevated. At the current pace, every extra month adds billions more in servicing costs before the fiscal year ends.
