The interest bill on US debt exceeds $1 trillion annually

(Bloomberg) — U.S. Treasuries could face renewed selling pressure in the new year if one measure of the nation’s ballooning debt repayment bill is any guide.

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Estimated annual interest payments on the U.S. government’s debt pile rose to more than $1 trillion at the end of last month, a Bloomberg analysis showed. This expected amount has doubled in the past nineteen months compared to the equivalent figure expected at that time.

Estimated interest expense is calculated using U.S. Treasury Department data that shows the government’s monthly debt balances and the average interest it pays.

Of course, the measure of the estimated interest costs differs from what the Treasury actually paid. Total interest costs in the fiscal year that ended September 30 were $879.3 billion, up from $717.6 billion in the previous year and about 14% of total expenses.

But looking ahead, rising yields on long-term Treasuries in recent months suggest the government will continue to face a rising interest bill.

Deteriorating metrics could reignite debate over the US fiscal path amid heavy borrowing from Washington. This dynamic has already helped lift bond yields, threatened the return of so-called bond custodialism, and prompted Fitch Ratings to downgrade the US government debt rating in August.

“There will be further increases in Treasury coupon auctions and outstanding Treasury bills in the future,” Ira Jersey and Will Hoffman, strategists at Bloomberg Intelligence, wrote in a research note. “Along with deficits of more than $2 trillion for the foreseeable future, increasing maturities following increased issuance from March 2020 will also need to be refinanced.”

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(Updates to clarify interest cost calculation methodology.)

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