US debt servicing costs reach record $1.1 trillion in fiscal 2026

US interest payments on federal debt have hit a record $1.1 trillion in fiscal 2026, and a prominent Financial Times journalist says the resulting squeeze on the budget may already be a chronic debt crisis playing out in slow motion rather than a sudden market shock. The warning lands as the 10-year Treasury yield sits above 5% and the Committee for a Responsible Federal Budget flags a growing risk of fiscal distress.

• US debt servicing costs hit a record $1.1 trillion in fiscal 2026, according to CRFB estimates.
• Treasuries once sold at 1% to 3% are now being refinanced at rates as high as 6%.
• Scope Ratings kept the US at AA- but projects debt near 160% of GDP within a decade.

• $1.1T fiscal 2026 interest bill, exceeding spending on defense or Medicare
• 3.4% interest costs as a share of GDP, a record level
• 6% new refinancing rate on Treasuries once sold at 1% to 3%
• 160% debt-to-GDP level Scope Ratings projects within a decade

Financial Times journalist Robin Wigglesworth, author of A Fabulous Debt, told The Long View podcast that he has grown more worried about US debt than he used to be, though he remains less alarmed than much of the public, according to Watcher Guru. His argument centers on a distinction between a fast-moving bond market panic and a slower erosion of fiscal room that he says is already underway.

Interest bill tops $1.1 trillion, a record 3.4% of GDP

The Committee for a Responsible Federal Budget estimates that interest payments reached $1.1 trillion in fiscal 2026, equal to a record 3.4% of GDP and now larger than federal spending on either defense or Medicare. Wigglesworth put his own estimate close to that figure, at roughly 3.5% to 3.6% of GDP.

Much of the increase traces back to refinancing. Treasury debt originally sold at yields of 1% to 3% is now rolling over at rates as high as 6%, pushing up the government’s borrowing costs even without new deficit spending.

Wigglesworth expects the burden to keep climbing but not explode overnight.

And that is not great. And it is definitely going higher, but it still is another decade before it hits kind of 5%-ish.

Robin Wigglesworth, Financial Times journalist

Wigglesworth frames it as ‘chronic,’ not an Argentina-style default

Wigglesworth rejects comparisons to sovereign defaults in Argentina or Greece. “I don’t think that happens in a country like the United States that can literally print dollars,” he said on the podcast.

Instead, he describes a gradual process in which rising debt service costs crowd out other government spending rather than triggering hyperinflation or a bond market collapse. He called it “the early stages of what I’d call a chronic debt crisis,” adding that “it’s just very slow, very gradual.”

Not everyone takes the slow-burn framing as reassurance. CRFB President Maya MacGuineas has struck a sharper tone as the 10-year Treasury yield has climbed above 5%, a level that raises borrowing costs across the economy. She said a fiscal crisis, once unthinkable, is now a distinct possibility, a more urgent assessment than Wigglesworth’s own.

Scope Ratings projects debt near 160% of GDP within a decade

Scope Ratings this month reaffirmed the United States at AA- while projecting federal debt could approach 160% of GDP within ten years. That trajectory would leave Washington with less fiscal space to respond to a future recession or financial shock, a concern Wigglesworth’s analysis echoes.

Wigglesworth’s book traces government borrowing back to 1171, when Venice financed a war fleet with tradable loans paying 5% annual interest. Venice never fully repaid that debt, but the resulting Rialto market became the world’s first bond market, a precedent he uses to argue that chronic, unresolved sovereign debt is not new.

The BlockWest read. A slow-motion squeeze changes the calculus for allocators differently than a sudden default would. Treasury rolling at 6% against a 10-year yield above 5% means fixed-income portfolios face years of elevated real costs rather than a single shock, pressuring equities and crowding out fiscal flexibility that crypto and other risk assets have historically benefited from during downturns.

CRFB’s next fiscal update and Scope Ratings’ scheduled sovereign reviews will show whether the debt-to-GDP trajectory tracks the 160% decade-out projection, while markets will watch whether the 10-year yield holds above 5% or retreats as the Federal Reserve’s policy path becomes clearer.

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