The government’s near-$40 trillion national debt is now costing the Treasury more than $3 billion a day in service payments, according to a new report from the Congressional Budget Office (CBO).
In its August budget update, the CBO reported that net interest on public debt totaled $963 billion between October 2025 (when the fiscal year begins) and July 2026. That equates to $96.3 billion a month, or approximately $3.18 billion a day over the 303 days in between.
Interest payments on the debt have grown by $117 billion—or 14%—compared to the same period last year, the CBO added, on account of the debt being “larger than it was in the first 10 months of fiscal year 2025 and because of higher long-term interest rates.” The CBO, led by director Phil Swagel, added: “Declines in short-term rates partially mitigated the overall rise in interest payments.”
The latest budget update is further evidence for debt hawks who suggest policymakers are heading in the wrong direction when it comes to fiscal responsibility: Deficits totaled $1.8 trillion in the first 10 months of this fiscal year, $169 billion more than the deficit recorded during the same period last fiscal year.
With that information in mind, the CBO updated its deficit projection for the total fiscal year to $2.1 trillion, $200 billion more than the deficit projected in February of this year.
The value of U.S. debt isn’t necessarily a concern for economists—it does, after all, form the basis of the U.S. Treasury market, one of the safest asset classes on the planet. The concern for debt hawks is that the U.S. debt-to-GDP ratio is becoming unbalanced (currently at 122% per the St Louis Fed), and lenders at some stage will attach a higher risk premium to lending, pushing up interest as a result.
While 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 as much, saying a “debt-induced heart attack” will be prompted by debt payments crowding out public spending.
Bessent’s yen move
The CBO report comes after the Treasury’s move last week to backstop the Japanese yen. Treasury Secretary Scott Bessent confirmed the move was to help stabilize 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.”
The Treasury Secretary had been clear in his intention to support the currency: 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.
A stable outlook for the Asian—and more specifically, the Japanese—economy is indeed of significant importance to the U.S.: Treasury data confirms Japan is the top holder of U.S. debt. If Japan sold those bonds to buy its own currency, it would drive up yields on U.S. bonds.
The data, updated to May 2026, confirms Japan owns $1.14 trillion in U.S. Treasury securities. Japan has been the top holder of U.S. securities for some time, with its holdings sitting above the $1.1 trillion mark for the past year.
At the time of the intervention, the yen rallied as high as 155 to the dollar, but since then has unwound to approximately 159. Markets had—by and large—expected the move, as UBS’s Paul Donovan highlighted in a note to clients this morning: “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.”
