The US debt interest burden has broken a 34-year-old record, with federal net interest payments now consuming 18.5% of all government revenue, equivalent to $1.25 trillion a year, according to investment management firm DoubleLine.
The figure surpasses the previous peak of 18.4% set in 1991 and exceeds the entire 2026 defence budget.
How the US debt interest burden compares to 1991
DoubleLine analysts argue the comparison flatters the current position. In 1991, debt held by the public stood at roughly 44% of US GDP. Today, that figure has topped $32 trillion, more than 100% of GDP.
The government once managed an 8% interest rate on 30-year Treasuries when the debt was far smaller. That same rate, applied to a vastly larger principal, now consumes a far greater share of the budget.
“The federal government has reached a record interest burden with the long bond nowhere near a record yield,” DoubleLine analysts wrote. “The yield itself might look ordinary by historical standards, but the government’s sensitivity to it is not.”
The national debt now stands at $40 trillion. Interest expense as a percentage of revenue has tripled since 2015, according to global market commentator the Kobeissi Letter, citing the Congressional Budget Office, which projects that share will climb to 25% by 2036.
“The US debt crisis is in uncharted territory,” the Kobeissi Letter wrote. “These projections assume no major slowdown, recession, or significant rise in Treasury yields over this period.”
AI bond issuance adds pressure to already stretched Treasury market
The US debt interest burden is being compounded by a surge in corporate borrowing from the technology sector. AI giants issued $225 billion in bonds in the first half of 2026, with much of the capital flowing into 10-to-30-year instruments, competing directly with US Treasuries for long-term investors.
Economist Ed Yardeni described the dynamic as a straightforward crowding-out effect. “Capital flowing into corporate bonds is capital not flowing into Treasuries, and Treasury yields have had to rise to clear the market,” he wrote in a recent note. “In short, the AI revolution is producing a classic crowding-out effect, causing Treasury yields to rise.”
Much of that corporate capital expenditure is tax-deductible, meaning the investment boom may simultaneously pressure the government’s borrowing costs and reduce its tax receipts.
Bessent buyback fails to hold yields down
On 19 August, Treasury Secretary Scott Bessent announced he was at least doubling the size of the Treasury’s bond buyback operations, from $2 billion to at least $4 billion per operation, in a move that surprised investors as a rare direct market intervention.
According to Yahoo Finance/Quartz, the announcement ran alongside a parallel effort to support the Japanese yen, partly designed to discourage Japan, the largest foreign holder of US debt at $1.1 trillion, from selling its Treasury holdings.
The effect proved short-lived. The 30-year Treasury yield rose to 5.27% on 21 August, according to Edgex Exchange, erasing in just two trading days the full 10-basis-point drop that had followed the buyback announcement.
DoubleLine analysts said Bessent’s strategy blurred the line between routine cash management and direct market control. “Net interest expense has already reached a record share of revenue, while the Treasury continues to finance large deficits in a market with heavy private demand for capital,” they said. “That makes the level of the long bond more consequential than the historical comparison alone suggests.”
The Congressional Budget Office’s projection of 25% of revenue consumed by interest by 2036 is predicated on no recession and no sharp rise in Treasury yields, conditions the bond market is already testing.
