The federal government paid $709.3 billion of interest on its debt in the fiscal year that ended on Wednesday, according to the Treasury's daily cash statement. That is $100 billion, or 16.4 per cent, more than in fiscal 2025. It is more than twice the $299.5 billion paid in fiscal 2022, and 2.3 times the level of 2019.
For scale, the Treasury's payments to the states for Medicaid came to $721.4 billion over the same 12 months. Interest was 98 per cent of that. In fiscal 2022 it was 51 per cent. If the two lines keep growing at last year's pace, interest will pass Medicaid in fiscal 2027.
Another comparison: the government collected $3.56 trillion in income and payroll taxes withheld from paycheques in fiscal 2026. Interest came to about a fifth of that.
These are cash figures, recorded as money leaves the Treasury's account. The budget's own measure, net interest, counts interest as it accrues and subtracts what the government earns, and it will come with the Monthly Treasury Statement for September later this month.
More debt, and dearer notes
Two things pushed the bill up: how much the government owes, and what it pays on the longer-term part of it.
Debt held by the public, the part owed to investors outside the federal government, including the Federal Reserve, rose by $2.15 trillion over the fiscal year, or 7.1 per cent, to $32.4 trillion on 30 September. Including what the government owes its own trust funds, total public debt was $40.2 trillion.
The average rate across all its debt moved less. On all marketable Treasury debt it was 3.48 per cent in August, the latest month published, against 3.41 per cent a year earlier. Underneath that average, two things went in opposite directions. The average rate on Treasury bills, which mature within a year, fell to 3.79 per cent from 4.19, after the Federal Reserve's rate cuts in late 2025 worked through. The average on notes, which run from two to ten years, rose to 3.35 per cent from 3.11, as old low-coupon notes matured and were replaced.
The part still to come
That average on notes is where the next increase sits. On 30 September the five-year Treasury yielded 5.09 per cent and the ten-year 5.29 per cent, its highest close since 2002. A year earlier they were 3.74 and 4.16. Every note that matures now is refinanced at roughly 1.7 to 2 points more than the 3.35 per cent average the Treasury pays across all of its notes.
The same is true of short-term debt, which reprices fastest. Three-month bills yielded 4.20 per cent on 30 September, above the 3.79 per cent average on the bills outstanding in August, and the Federal Reserve raised rates in September. Unlike notes, bills roll over within months, so higher short rates reach the interest bill quickly.
Long bonds are further out of line. The 30-year yielded 5.64 per cent, against an average of 3.45 per cent on the Treasury bonds outstanding. This publication reported last month that the 30-year had closed at its highest since the bond was reintroduced in 2006.
What that means for households
Interest on the federal debt is not only a budget line. It is income for whoever holds the bonds, including pension funds, money market funds and households, and it is also the benchmark that mortgage rates track. The same yields that raise the government's interest bill are the reason the average 30-year mortgage rate reached 7.28 per cent last week.
For the budget, the arithmetic is mechanical. Interest payments have risen by $100 billion or more in each of the past three years. The debt is still growing, and the rate on new debt is now well above the rate on the old debt it replaces. Both push in the same direction.
Interest on Treasury securities, Medicaid grants and withheld tax receipts are fiscal-year-to-date cash figures from the Daily Treasury Statement (operating cash deposits and withdrawals) for 30 September 2026 and the last business day of each earlier fiscal year, retrieved from the Treasury's Fiscal Data API. They are cash payments, not the accrual-based net interest reported in the federal budget, which also nets out interest the government receives; the official figure for fiscal 2026 will appear in the Monthly Treasury Statement for September. Debt totals are from Debt to the Penny. Average interest rates are from the Treasury's Average Interest Rates on U.S. Treasury Securities dataset, for which August 2026 is the latest month published. Market yields are from the Treasury's daily par yield curve. Growth rates, ratios and the refinancing comparison are this publication's calculations. Accurate to 1pm ET on 4 October 2026.
Topics moneytreasurytreasury yieldsfederal budget
