Interest on the National Debt Hit a Record $1.36 Trillion

TL;DR: Treasury data show the government paid a record $1.36 trillion in gross interest in fiscal 2026, at an average rate of 3.53%, per Fortune. I'd price any private deal against what Treasuries pay, because that's the bar it has to clear.

What happened with interest on the national debt?

I'd start with the gross number. Gross interest, before subtracting what Treasury earns, came to $1.36 trillion at an average rate of 3.53%, more than double the 2021 rate. Check whether a writer is quoting gross or net interest before you compare anything.

Measure	Fiscal 2026	Who reported it
Gross interest	$1.36 trillion	Fortune, citing Treasury
Budget deficit	$1.99 trillion	Fortune, citing Treasury

That interest bill sits inside a deficit that also grew. Fortune reports the deficit widened to $1.99 trillion, 12% worse than the $1.78 trillion gap in fiscal 2025. CNBC adds that this was the 25th straight fiscal year operating at a deficit.

Did the bond market react?

Barely, in one corner of it. The iShares 20+ Year Treasury Bond ETF (TLT) closed at $80.05 on October 16, up 0.1%, and gained 2.65% over the week, per 24/7 Wall St. CNBC reported on October 16 that the rising debt bill had helped exacerbate angst among bond traders, who sent the 10-year and 30-year U.S. Treasury yields to 24-year highs the week before.

So the market isn't ignoring this. Yields are already high. One quiet week for a long-bond fund won't tell you where they go next. I don't make market-timing calls, and a debt total isn't a timing signal.

Why does a Treasury yield matter to a private-markets investor?

Because Treasuries are the yardstick for every private deal you'll be shown. The 3.53% average rate is a blend of old and new debt, so it isn't the number to hold a deal against. Use today's 10-year yield instead, and ask a sponsor pitching a projected 12% to justify the gap over it. The honest comparison subtracts fees and the cost of being locked up.

On a nuclear submarine I signed off on QA work, and nothing counted until someone verified it. I read a deal memo the same way: verify before you trust, and run downside first. How do you lose money here, and does the spread over Treasuries pay you for that risk?

The same yardstick applies to the funds I've covered. In real estate debt funds, a generous-looking yield gets thinner once redemptions stack up and you can't get out. Private credit's insurance exposure raises the question of who holds the risk if rates stay high and borrowers struggle. And private credit's record fundraising alongside record BDC defaults is the pairing I'd watch: money pouring in while more loans go bad.

If you want the plumbing behind the number, my explainer on how the Treasury and Fed manage the national debt covers who issues what and who buys it. My earlier piece on the $40 trillion debt total covers the principal side.

What should you watch next?

Read the next Treasury monthly statement to see whether net interest keeps climbing as a share of outlays. Track the 10-year yield, since it's the benchmark in every deal memo you read. And check the refinancing dates on anything you already own, because higher base rates reach a leveraged asset when its debt rolls.

Common mistakes

The first is reading the record as a signal to buy or sell something this week. It tells you the cost of carrying the debt, not what yields do next. The second is treating one calm week in TLT as proof the market is unbothered. The third is comparing a sponsor's projected return to a Treasury yield without taking out fees. Projected IRRs are marketing, so ask for realized returns from full-cycle deals.

FAQ

How much did the U.S. pay in interest in fiscal 2026? Gross interest was $1.36 trillion, per Fortune, citing Treasury data.

Why is the interest bill so high? There's more debt, and it costs more. Fortune says the average rate of 3.53% is more than double the rate in 2021. Both factors push the total up.

Is the federal government still running a deficit? Yes. Fortune puts the fiscal 2026 deficit at $1.99 trillion, and CNBC says it was the 25th straight fiscal year in deficit.

One thing to do today

Pull up the current 10-year Treasury yield, then take the next private deal in your inbox and write down its projected return minus fees. If the spread over Treasuries doesn't pay you for the lockup, you have your answer. For more of this kind of read each week, sign up for the free AIN briefing.

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