The US Treasury's gross interest bill on public debt reached $1.267 trillion in the first 11 months of fiscal 2026, up 12% from a year earlier. The run rate now points past $1.3 trillion for the full year for the first time, even as markets lean toward another Fed rate hike rather than cuts.
The US Treasury's gross interest payments on public debt securities reached $1.267 trillion in the first 11 months of fiscal 2026, through August. That is up from about $1.124 trillion in the same stretch of fiscal 2025.
August alone carried $97.769 billion in gross interest outlays, or more than $3.15 billion a day. With one month left in the fiscal year, the run rate points past $1.3 trillion for a full year for the first time, according to the Kobeissi Letter on X.
A record share of federal revenue
Interest costs rose $139 billion year-over-year in the first 11 months of fiscal 2026, a 12% increase, to a record $1.27 trillion, the Kobeissi Letter said. That figure now represents about 26% of total US government receipts. It also marks the sixth consecutive annual increase, totaling $784 billion, or 162%, the newsletter added.
According to the Kobeissi Letter: "The US government needs lower rates more than anyone."
Total public debt stood near $40.2 trillion at the end of August, leaving interest among the largest federal budget lines as older low-rate debt rolls into higher coupons.
Markets bet on another hike, not cuts
Yet investors appear to be positioning for another rate hike, not lower rates. The Kobeissi Letter said markets are pricing in a 53% chance the Federal Reserve raises rates again in October. Last year, markets had instead expected three rate cuts by October 2026.
If the Fed hikes again next month, rates would end up 125 basis points higher than markets had expected.
Sources: US Treasury, The Daily Hodl
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