8.5% Growth vs. 3.4% Interest: The Math Keeping the US Debt Spiral at Bay

Key Summary

US 10-year Treasury yields surpassed 5% and interest costs exceeded $1 trillion in the second quarter, yet annualized growth of 8.5% outpaced the 3.4% average interest rate on the debt. TD Securities attributes the lack of a debt spiral to a weighted-average maturity of 5.9 years and an average coupon of 3.1% on long-term bonds. The Congressional Budget Office projects public debt to reach 101% of GDP in fiscal 2026, with fiscal 2027 and 2029 interest costs estimated at $1.4 trillion and $1.6 trillion, respectively. Stronger economies and expected Federal Reserve rate hikes are cited as factors preventing a debt crisis.