MediumIV Macro Policy & Sovereign Debt16 October 2026, Friday
US net interest bill climbs to 1.05 trillion dollars in fiscal 2026
Final Treasury figures released on 16 October show fiscal 2026 closing with a deficit of $1.992 trillion. Gross interest costs hit a record $1.36 trillion and on their own account for roughly two-thirds of the $217 billion widening in the deficit.
According to Treasury data reported by investingLive on 16 October, the deficit for the fiscal year ending 30 September came to $1.992 trillion. That is $217 billion above the $1.775 trillion recorded in 2025 and the highest in five years. Gross interest on the debt rose by $144 billion (12%) to $1.36 trillion. Fortune reports that net interest climbed 8% to $1.05 trillion, or roughly $2.9 billion a day. Receipts grew 3% to $5.4 trillion, while outlays rose 6% to $7.4 trillion.
The heaviest part of the interest burden is still ahead. Treasury data cited by Fortune put the average interest rate on the debt at 3.53%. Trading Economics shows the 10-year yield closing at 5.09% on 16 October. Roughly a third of publicly held debt, more than $10 trillion, matures within 12 months, and each rollover drags the average towards market rates. The Peterson Foundation calculates net interest at a record 3.2% of GDP; the CRFB's preliminary estimate on 1 October was 3.4%.
On the revenue side, customs receipts have all but vanished. In September gross customs collections were $25.27 billion, but $19.36 billion was refunded, leaving net revenue at just $5.91 billion. Refunds thus reached 77% of the gross figure. The CRFB notes that tariff revenue has stayed flat despite higher rates because of refunds ordered by the Supreme Court. September alone produced a $27 billion deficit, against market expectations of $29 billion and a $198 billion surplus in September 2025.
Talay assessment
Bottom line
The final figures confirm the CBO's 8 October estimate; what is new is that interest is now driving the deficit wider. With the average rate at 3.53% and market yields above 5%, every rollover of the more than $10 trillion in near-term debt raises the bill. Customs refunds have also eroded the cushion on the revenue side. The most likely path is a larger interest contribution to the deficit in fiscal 2027.
Likely effects
- US TreasuriesNegative1–6 months
An interest-driven deficit enlarges issuance needs; a 10-year yield holding above 5% keeps the term premium elevated.
- Fiscal policyNegativeWeeks
With 77% of September customs revenue refunded, the assumption that tariffs will close the deficit looks weaker.
- TürkiyeNegative1–6 months
Heavier US debt supply keeps global benchmark yields high, and Türkiye's cost of rolling over dollar debt is set off that floor.
Possibilities, ranked
- 1Interest bill grows gradually60%
The average rate edges towards market yields, the deficit stays near $2 trillion and bond supply rises.
Watch: Issuance sizes at the far end of the curve in the Treasury's next quarterly refunding plan
- 2Interest shock accelerates25%
The Fed hikes in December, extended-maturity yields rise and growth in interest costs clearly exceeds 8%.
Watch: The 10-year yield breaking above 5.36% and the interest line in the monthly budget statement
- 3Growth provides relief15%
Energy prices ease, yields fall and strong nominal growth stabilises the interest-to-GDP ratio.
Watch: Brent dropping below $100 and the 10-year yield falling under 4.8%
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- Fiscal-year deficit▼ $1.992tn
- Gross interest cost▼ $1.36tn
- September customs refunds▼ 77%