Bronze seal next to the door of the U.S. Treasury Building in Washington, U.S., January 20, 2023.
Kevin Lamarque | Reuters
The U.S. Treasury Department reported on Thursday that the U.S. government’s interest payments on its $35.3 trillion Treasury debt exceeded $1 trillion for the first time this year.
As the Federal Reserve maintains its benchmark interest rate at the highest level in 23 years, the government has allocated US$1.049 trillion in debt service funds, a 30% increase from the same period last year and part of the US$1.158 trillion expected full-year repayment.
Excluding interest earned on government investments, net interest payments totaled $843 billion, more than any other category except Social Security and Medicare.
The sharp rise in debt servicing costs comes as the U.S. budget deficit soared in August, bringing the full-year budget deficit to nearly $2 trillion.
With a month left in the federal fiscal year, the deficit suddenly jumped $380 billion in August, a dramatic reversal from the $89 billion surplus in the same month a year ago, largely due to accounting maneuvers involving student debt relief.
That puts the deficit in 2024 at nearly $1.9 trillion, a 24% increase from the same period a year ago.
The Fed is widely expected to cut interest rates next week, but by only a quarter of a percentage point. However, U.S. Treasury yields have fallen sharply in recent weeks on expectations of more moves in the coming months.
benchmark 10 year note The yield last stood at about 3.7%, down more than three-quarters since early July.
