CBO Says U.S. Treasury Debt Interest Hit $963 Billion in 10 Months, Deficit Tracking Toward $2.1 Trillion for the Year

The Congressional Budget Office put a number on Washington's debt problem this month, and it's not a small one. Net interest on the national debt totaled $963 billion between October 2025 and July 2026, according to the CBO's August budget update. Spread across those 303 days, that's about $3.18 billion a day, just in interest.

That figure is up $117 billion, or 14%, from the same 10-month stretch a year earlier. The CBO, led by director Phil Swagel, attributed the jump to the debt being larger than it was in the first 10 months of fiscal year 2025 and to higher long-term interest rates. Declines in short-term rates partially offset the overall rise, according to the CBO.

The deficit picture isn't any better. The CBO says the government ran a $1.8 trillion deficit in the first 10 months of this fiscal year, $169 billion more than the deficit recorded during the same period last fiscal year. Based on that trajectory, the CBO now projects the full-year deficit at $2.1 trillion, $200 billion more than the deficit it projected in February of this year.

National debt is now near $40 trillion. Debt-to-GDP currently sits at 122%, according to the St. Louis Fed. That's a ratio, and debt hawks argue it's becoming unbalanced.

Why the debt-to-GDP number actually matters

The value of U.S. debt isn't necessarily a concern for economists — it forms the basis of the U.S. Treasury market, considered one of the safest asset classes on the planet. The concern for debt hawks is that if the debt-to-GDP ratio becomes unbalanced, lenders will eventually attach a higher risk premium to lending, pushing up interest as a result.

The bull case is that the U.S. can rebalance by boosting economic growth. Bearish concerns range from inflation to the crowding out of public investment by interest payments. Bridgewater Associates founder Ray Dalio has warned that a "debt-induced heart attack" will be prompted by debt payments crowding out public spending.

The yen intervention adds a wrinkle

This CBO report came after the U.S. Treasury's move last week to backstop the Japanese yen. Treasury Secretary Scott Bessent confirmed the move was meant to help stabilize the currency in the region as a whole, telling CNBC: "A stable yen is not only important for the U.S., but very important for the entire region." A photo of Bessent's to-do list from a cabinet meeting at the end of July featured a reminder to buy $5 to $10 billion worth of the currency.

Treasury data confirms Japan is the top holder of U.S. debt, owning $1.14 trillion in U.S. Treasury securities as of the most recent data, updated to May 2026. Japan has held above the $1.1 trillion mark for the past year. If Japan sold those bonds to buy its own currency, it would drive up yields on U.S. bonds. At the time of the intervention, the yen rallied as high as 155 to the dollar, but has since unwound to approximately 159.

Markets had largely expected the move. As UBS's Paul Donovan noted in a client note: "Policy has not changed, and there is little evidence yen weakness was the result of a speculative attack, so this drift back to market-perceived fair value is hardly surprising."

The CBO's own $200 billion upward revision to its deficit forecast, made in just six months, suggests the trend is getting worse, not better. The open question isn't whether $3 billion a day in interest is a lot of money. It obviously is. The open question is at what debt-to-GDP level lenders start pricing in real risk, and whether that line gets crossed before Washington changes course.