U.S. government borrowing costs have climbed to their highest levels in decades, reviving concerns that the country’s rising debt load could eventually trigger a fiscal crisis. The benchmark 10-year Treasury yield is now firmly above 5%, while the government’s net interest costs for the first 11 months of fiscal year 2026 are estimated at about $1.05 trillion.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, has warned that higher borrowing costs could become self-reinforcing. In her view, if rising interest expenses add to the debt burden and that larger debt then pushes interest costs even higher, the process could ultimately spin out of control.
At the same time, several bond market experts say the U.S. is still some distance from a breaking point. TD Securities strategists Gennadiy Goldberg and Molly Brooks said a “fiscal apocalypse” is not here yet, arguing that the latest jump in yields reflects not only debt concerns but also stronger-than-expected economic growth.
The bank estimates U.S. interest expenses at around $1.1 trillion in fiscal 2026 and expects them to keep rising if rates stay elevated. TD Securities projects financing costs could reach $1.4 trillion in fiscal 2027, $1.5 trillion in 2028 and $1.6 trillion in 2029 if yields remain near current levels.
Analysts say an important buffer is that Washington does not need to refinance its entire debt stock immediately at today’s higher rates. The weighted-average maturity of U.S. government debt is about 5.9 years, meaning the impact of higher borrowing costs is transmitted gradually as existing bonds mature and new debt is issued. The average coupon on Treasury securities excluding bills is still only 3.1%.
TD Securities also noted that the average interest rate on U.S. debt, about 3.4%, remains below the pace of nominal economic growth. According to the latest Bureau of Economic Analysis estimate, nominal U.S. GDP grew at an annualized rate of 8.5% in the second quarter. Matthew Reese, head of global bond strategies at L&G Asset Management, told CNBC that fears of an imminent U.S. fiscal crisis are “exaggerated,” citing the U.S. dollar’s special status and the market’s liquidity and strong standing.
