The ugly US debt picture seems to get uglier by the day.
Case in point: rising interest payments on some $40 trillion in debt, in part powered by a recent climb in Treasury yields.
US annual interest expense is up to a record 18.5% of federal government revenue, according to fresh analysis from bond investment firm Doubleline (see chart below). This is now officially above the previous record of 18.4% set in 1991.
“The US debt crisis is in uncharted territory,” strategists at the Kobeissi Letter wrote in a note.
Consider this: The aforementioned percentage has more than quadrupled over the past four years. The US annual interest expense now stands at a record $1.25 trillion, more than four times the level seen in 1991.
To be sure, the surge in interest expense fundamentally threatens long-term fiscal stability.
It effectively means that nearly one out of every five dollars collected by the government now goes strictly toward servicing existing national debt. That is money that could be funding productive economic investments like defense, infrastructure, or social safety nets such as Social Security.
As debt service costs surpass major federal programs, mandatory spending risks crowding out discretionary spending. In turn, it creates a negative feedback loop where the government must issue additional debt simply to cover its interest costs.
The structural burden also reduces the federal government’s flexibility to deploy fiscal stimulus during future recessions.
Not helping matters at the moment are rising interest rates as seen on the 10-year and 30-year Treasurys.
“It is a striking milestone not only because of the size of the debt, but because of the growth that has accompanied it,” Fed Watch Advisors founder Ben Emons pointed out. “Since 1970, nominal GDP has expanded by an average of $470 billion per year, while federal debt has climbed even faster, rising about $760 billion annually over the same period.”
“The $40 trillion moment may still feel manageable for markets,” he added. “The U.S. is currently borrowing at a weighted‑average rate near 3.5%, well below the 7% threshold where debt-sustainability models suggest real stress would begin.”
Brian Sozziis Yahoo Finance’s Executive Editor, host of thePower Players with Brian Sozzipodcast, and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X@BrianSozzi,Instagram, andLinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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