Wall St bond rout fuels ‘fiscal crisis’ fears

By the Editorial Team · Wednesday, September 16, 2026

U.S. borrowing costs reached their highest levels in three years, with the 10-year Treasury yield surpassing 5 percent, driven by inflation and rising oil prices. This increase is raising concerns about growing federal debt expenses, potentially leading to significantly higher budget deficits and economic strain if interest rates remain elevated.

Borrowing costs in the United States climbed to their highest levels in three years on Monday, with the yield on the benchmark 10-year Treasury note surpassing 5 percent for the first time since 2023. This surge, driven in part by rising oil prices and persistent inflation, has amplified concerns about a potential fiscal crisis and increased pressure on new Federal Reserve Chair Kevin Warsh to continue raising interest rates.

Over the past two weeks, the yield on the 10-year government bond rose sharply from below 4.7 percent to just above 5 percent on Monday. Meanwhile, the yield on the 30-year Treasury bond experienced an even more pronounced increase, reaching 5.38 percent, marking its highest point since 2007.

The developments have drawn attention to the United States’ growing debt burden and its cost to the federal budget. Rhoda MacGuineas, president of the Committee for a Responsible Federal Budget, emphasized that the era of low interest rates has ended. She noted that the government’s extensive borrowing under the assumption of inexpensive financing is now resulting in significantly higher interest expenses.

Last year, the federal government spent nearly $1 trillion on interest payments—approximately three times the amount spent in 2020 and 2021 and exceeding expenditures on defense. With interest rates rising, MacGuineas warned that these costs are expected to escalate substantially. According to projections from the Congressional Budget Office (CBO), the deficit is anticipated to grow from $1.9 trillion in fiscal year 2026, equivalent to 5.8 percent of gross domestic product (GDP), to $3.1 trillion or 6.7 percent of GDP by 2036. Net interest payments are also expected to increase from 3.3 percent to 4.6 percent of GDP over the same period.

MacGuineas cautioned that if interest rates remain more than 80 basis points above CBO forecasts, the United States could face annual interest expenses of $2.7 trillion by the end of the decade—exceeding the federal spending on Medicare and Social Security retirement benefits combined. She further highlighted that elevated interest rates contribute to higher living costs for American households, pointing to mortgage rates reaching 7 percent and increased borrowing costs across various loan categories.

The repercussions extend beyond consumers, as rising borrowing costs may constrain business investment, potentially slowing economic growth and reducing overall prosperity. MacGuineas concluded by warning that the cyclical relationship between rising debt and increasing interest expenses risks pushing the nation toward an unsustainable fiscal trajectory if unchecked.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.