Federal interest costs surge 14% in first ten months of FY 2026

The Congressional Budget Office’s recent Monthly Budget Review reveals that interest expenses on the United States debt jumped 14% in the first ten months of fiscal year 2026, climbing to $963 billion from $846 billion a year earlier. This increase was the largest among all federal spending categories, surpassing the 5% rise in Social Security and the 8% gains in Medicare and Medicaid. The higher cost stems from a 7.3% rise in the overall debt, now standing at $40 trillion, and from rising yields on Treasury securities, with two-year yields up 6% and ten-year yields up 7.3% since the previous July.

Deficits also grew 10% to $1.8 trillion, prompting the Treasury to issue more debt. In response, Treasury Secretary Scott Bessent unveiled a strategy on August 19 to purchase large amounts of ten-year Treasuries while selling newly issued short-term bonds at lower rates, aiming to lower the average interest burden. Analysts note the measure is a temporary fix that does not address the underlying growth in borrowing.