The federal government has spent more on net interest than on Medicare or the military so far this fiscal year, and borrowing costs climbed again Wednesday as Treasury yields hit their highest levels in nearly two decades.
Net interest on the federal debt reached $1.05 trillion in the first 11 months of fiscal 2026, up 12% from a year earlier, according to the Congressional Budget Office’s monthly budget review. Medicare spending totaled $976 billion, and Defense Department military spending totaled $833 billion.
The 10-year Treasury yield closed at 5.11%, its highest level since 2007, up from 4.96% on Tuesday, according to Treasury Department data. The 30-year yield closed at 5.40%, also its highest in nearly two decades.
The same day, the International Monetary Fund released its 2026 Annual Report, which said government interest payments worldwide have risen by almost half in three years, to nearly 3% of gross domestic product.
For deficit countries “such as the US, credible fiscal consolidation could reduce demand for imports and external financing,” the report said. In its February review of the U.S. economy, the IMF called for “a clear, frontloaded fiscal consolidation plan” to put U.S. debt on a downward trajectory.
Short-term bills made up 22.8% of marketable debt in August, up from 21.7% a year earlier, as bills outstanding grew by $879 billion to $7.25 trillion, according to Treasury data. The CBO said declines in short-term rates partially offset the rise in interest costs this year.
Before taking office, Treasury Secretary Scott Bessent criticized predecessor Janet Yellen for relying on short-term borrowing. Treasury did not respond to a question about that criticism.
The IMF said the two largest stablecoin issuers now hold more Treasury bills than Saudi Arabia. Tether and Circle held $123.5 billion in bills as of June 30, compared with Saudi Arabia’s $34 billion, according to company reports and Treasury data. The IMF warned that “large redemptions could pose a risk to markets for the government bonds held by stablecoin issuers.”
“The IMF is right to be warning the United States that it is on an unsustainable public debt path that could end in tears,” Desmond Lachman, a former IMF official now at the American Enterprise Institute, told The Center Square. “Sadly, the IMF’s advice seems to be falling on deaf ears.”
The Treasury Department did not respond by publication to questions about the rise in yields. The IMF did not respond to questions about the report.
