US Debt Interest Costs Skyrocket 87% as New Federal Fiscal Year Begins

Interest payments on Treasurys rocketed higher to begin the federal government's new fiscal year amid growing alarms about the sustainability of US debt.

Gross interest on Treasury debt reached $88.9 billion in October, according to department data published Monday. That's nearly 87% higher than in the same period of 2022, when interest payments amounted to $47.5 billion.

The jump reflects the impact of high bond yields over the past year as well as the massive surge in federal deficits adding on to the rapidly expanding pile of total debt.

Weighted average interest for all outstanding debt also rose in October to 3.05%, according to Bloomberg. This marks an 87-basis-point surge from a year ago, and is the highest level since 2010.

Analysts have recently started calling out this trend with greater alarm, warning that rising borrowing costs could eventually become unsustainable.

Congressional Budget Office projections estimate that net interest's share of GDP could jump from 1% to 6.7% by 2053. That would outweigh federal contributions to other areas, including Social Security and defense.

Such warnings have contributed to a tumultuous period for the Treasury market, which has seen a historic sell-off amid Fed rate hikes.

Meanwhile, the federal deficit began the new fiscal year in better shape, narrowing to $66.6 billion last month from $87.9 billion a year ago as an influx of tax receipts helped relieve pressure on Treasury coffers.

Still, Moody's lowered its US credit outlook on Friday to "negative," signaling a possible downgrade in the future. The ratings agency cited ballooning deficits and political dysfunction.