US Debt Interest Bill Just Ate a Record 18.5% of Revenue
A New Record Nobody Wanted
The US government is now spending a record 18.5% of its total revenue just to cover interest on its debt. That tops the previous record of 18.4% set back in 1991.
In raw dollars, that works out to roughly $1.25 trillion in net interest payments for 2025. That is more than the entire 2026 defense budget. Interest is now the second-largest budget category behind only Social Security.
The Scary Part Is the Yield
Here is what should worry bond traders. In 1991, the 30-year Treasury yield was sitting around 8% after spending much of the prior decade in double digits. Today it is only a little above 5%.
So the government hit a record interest burden without record yields. The difference is the size of the debt stock. Debt held by the public was about 44% of GDP in 1991. Now it is roughly equal to the entire US economy, with gross national debt over $40 trillion.
The sensitivity to rates is what is new. A much larger debt pile means the government feels every tick higher in yields far more than it used to.
Where This Goes From Here
The Congressional Budget Office projects net interest outlays climbing from about $1.0 trillion in fiscal 2026 to roughly $2.1 trillion by 2036. As a share of revenue, that takes the interest burden from 18.5% toward 25%.
By 2036, interest costs would reach 4.6% of GDP, nearly matching all discretionary spending. The Treasury is also raising enormous sums at the same time private-sector financing needs are unusually large, with hyperscaler AI capex alone expected around $760 billion this year.
That supply collision is the real trade. When the government and the AI buildout are both competing for long-duration capital, term premium becomes the number to watch.
What It Means for the Options Market
A structurally higher interest burden keeps the long end of the curve under pressure, and bond volatility tends to bleed into equities. If term premium keeps drifting higher, duration is the pain trade.
Stocks to watch:
- TLT: long-duration Treasury ETF; the direct play on long-end yields and term premium repricing
- TBT: the leveraged inverse play for traders betting yields grind higher
- SPY: higher borrowing costs feed straight into corporate earnings multiples
- GLD: classic debt-debasement hedge if fiscal concerns escalate
Watch bond auction results and 30-year yield behavior for the next signal. More Unusual Whales news on fiscal data drops as it hits.