The federal interest burden has reached a new peak, exceeding even the record set in 1991, but analysts warn that the risks associated with servicing the ever-growing national debt are much higher today than they were 35 years ago, analysts warn.
A current one analysis Investment management firm Doubleline found that in 2025, the net federal interest payment on the now $40 trillion U.S. national debt reached 18.5% of sales, surpassing the record of 18.4% set in 1991. That means the U.S. is collecting nearly 19% of all taxes and revenue just to pay interest on its skyrocketing debt, which is $1.25 trillion — more than the entire 2026 defense budget.
Rising interest payments create a cycle: the government must borrow more just to cover interest, leaving it less flexible to spend on infrastructure, education and other growth-enhancing investments.
The amount of money needed just to pay the interest on America’s debt has increased over the past decade as interest rates have risen, with interest expenses as a percentage of revenues tripling since 2015, according to global market commentator Kobeissi Letter, citing the Congressional Budget Office, which forecasts the level of interest expenses climb to 25% until 2036.
“The US debt crisis is in uncharted territory,” wrote the Kobeissi letter on a Social media post. “These forecasts assume there will be no major slowdown, recession or significant increase in Treasury yields over this period.”
Why today’s debt interest rates are different from the previous record in 1991
In 1991, the U.S. economy was recovering from a recession and the oil shocks resulting from the Gulf War. High demand for bonds at the time caused 30-year Treasury yields to fall to about 8%, compared with more than 10% in previous decades.
Today the picture is different, Doubleline argued. The government could tolerate a higher interest rate of 8% when the debt was smaller, but that is not the case now. In 1991, national debt was about 44% of US GDP; the debt today Assets held by the public have exceeded $32 trillionmore than 100% of GDP. This lower interest rate is still costing the government a larger portion of its budget because the debt itself has increased so much.
“The federal government has reached a record interest rate burden, although the long bond is nowhere near the record yield,” analysts wrote. “The return itself may look normal by historical standards, but the government’s sensitivity is not.”
To complicate matters further, big tech companies, particularly hyperscalers, are turning to debt markets with AI giants Issuing $225 billion in bonds in the first half of 2026. Not only could much of this capital spending worsen national debt, but so could much of this investment are tax deductiblebut it bucks the trend of private companies borrowing less at a time when the government is also borrowing heavily. The long-term capital required for AI expansion is available Tech giants are flocking to 10- to 30-year bondsThis strains U.S. finances and puts pressure on the U.S. government to pay higher yields to keep demand for bonds high.
“Capital flowing into corporate bonds is capital not flowing into Treasuries, and Treasury yields had to rise to clear the market,” economist and Wall Street veteran Ed Yardeni wrote in a recent note. “In short, the AI revolution is creating a classic crowding-out effect that is driving up Treasury yields.”
To stabilize the bond market, US Treasury Secretary Scott Bessent doubled the size of the bond market Buybacks of 10- to 30-year bonds by the Ministry of Finance $2 billion to at least $4 billion per operation, a move that surprised investors and marked a rare direct intervention from the Treasury chief. For Doubleline analysts, the strategy blurred the line between cash management and market control – and showed how critical the situation is in the US when it comes to how it manages the interest on its debt.
“Net interest expense has already reached a record share of revenue as the Treasury continues to finance large deficits in a market with strong private capital demand,” analysts said. “This makes the amount of the long bond more meaningful than the historical comparison alone suggests.”
This story was originally featured on Fortune.com