U.S. Daily Interest Payments Rise to $3.8 Billion
The Kobeissi Letter reports that the U.S. federal government's current daily net interest payments are approximately $3.8 billion, surpassing its daily Medicare and defense spending.
Data from the U.S. Congressional Budget Office indicates that from October 2025 to June 2026, federal net interest payments will total $857 billion, averaging about $95.2 billion per month and approximately $3.1 billion per day; during this period, net interest will exceed defense and Medicare spending.
The $3.8 billion figure may be based on more recent fiscal data or annualized estimates, but the post does not specify the exact fiscal month, whether it uses net or total interest, whether it includes intra-governmental interest, or which official forecasting model is used. Therefore, this number cannot be directly compared to the CBO's cumulative figures for the previous nine months.
The total U.S. federal debt recently approached $40 trillion. Interest costs are determined by the size of outstanding tradable government bonds, refinancing rates of maturing debt, new deficit financing needs, and short-term interest rates; even if policy rates decline, the process of rolling over old debt to higher coupon rates may continue to drive interest payments up.
The Kobeissi Letter projects that by 2028, daily interest payments will reach about $5 billion, exceeding all other individual spending categories. This forecast depends on future deficits, government bond yields, inflation, economic growth, tax revenues, and fiscal policy, and should not be viewed as a definitive budget outcome.
From a market mechanism perspective, interest payments themselves are not discretionary cuts but a function of the debt size and market financing rates. An increase in government bond supply will require the private sector, banks, money market funds, foreign investors, and the Federal Reserve system to absorb more term risk; if buyers demand higher yields, the rising cost of fiscal financing will further widen the deficit, creating a "deficit-bonding-interest" feedback loop. Long-duration government bonds, interest-sensitive growth stocks, and highly leveraged companies are under pressure; money market funds, short-duration government bond holders, and some financial intermediaries benefit from higher risk-free rates.
Source: Public Information
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The U.S. fiscal interest burden was suppressed during the low-interest phase from 2020 to 2021, when federal debt levels significantly increased due to pandemic spending, but the cost of new government bond financing remained low. After 2022, the Federal Reserve's rapid interest rate hikes forced the Treasury to roll over maturing government bonds at higher yields and finance ongoing deficits; this transformed net interest from a relatively minor item in the budget to a major rigid expenditure competing with defense and Medicare. The issue is not just the high debt stock, but the gradual replacement of low-coupon old debt with high-coupon new debt as it matures.
In terms of capital pathways, the U.S. Treasury distributes deficits through short-term treasury bills, medium-term notes, and long-term government bonds to money market funds, banks, pension funds, insurance companies, foreign central banks, and private investors. Issuing short-term debt can temporarily lower average interest costs and meet money fund demand, but it increases refinancing frequency; long-term debt can lock in terms, but when term premiums rise, it raises current fiscal costs. The Treasury's issuance maturity structure, fiscal account balances, and repo market liquidity directly affect dollar liquidity and the marginal funding environment for risk assets.
Historically, after World War II, the U.S. gradually reduced the debt-to-GDP ratio through growth, inflation, financial repression, and budget adjustments; the high-interest period of the Volcker era in the 1980s showed that interest rates above nominal growth rates quickly increased the interest burden. Currently, unlike both scenarios: the U.S. has a global reserve currency and a deep government bond market that can sustain large-scale financing, but aging welfare spending, defense expenditures, and high deficits narrow the political space for fiscal adjustments. The market is shifting from "debt can be rolled over at low rates" to a phase where "term premiums and refinancing costs determine risk asset valuations."
Essentially, this is a transfer of pricing power. Over the past decade, the Federal Reserve suppressed risk-free rates, allowing fiscal deficits to be financed at low costs, with valuation gains flowing more towards growth stocks, private assets, and real estate; when government bonds need to attract buyers at higher yields, savings regain bargaining power, and the government and highly leveraged assets must pay higher prices for capital. Fiscal interventions can change short-term liquidity but cannot eliminate the long-term constraints between debt stock, real interest rates, and buyer risk preferences.
ABAB News · Cognitive Laws
Debt is not a cost; interest is the cash flow killer.
High rates first revalue assets, then rewrite fiscal policy.
When the government competes for capital, all valuations must yield.