US government debt is at 122.5% of GDP and has increased since previous quarter: such ratio is considered very high
changes in fiscal spending did not clearly match movements in the debt/GDP ratio: this implies that the US has very limited fiscal space to increase public spending in the future, when needed
IntroGovernment debt is the total amount of money owed by a country's government to its lenders. It accumulates when governments spend more than they collect in revenue, necessitating borrowing to cover the shortfall. This debt is typically held in the form of bonds, loans, and other financial instruments.
Market implicationIncreases or decreases in the amount of government debt owed have implications on both the economy and markets. In general, a rising government debt burden is likely to exert upward pressure to longer term bond yields, posing challenges for bond markets: higher debt may come via more bonds to be issued (=higher bond supply, rising bond yields, lower bond prices)
Less known is an additional effect: rising debt could bring rising yields to such an elevated - and attractive - point for investors that bonds risk crowding out equity markets: in other words investors may leave equity markets to enter bond markets to capture a disproportionate yield there, ultimately pushing stocks down in the process.
US interest expense
US interest expense
checking the cost of servicing government debt
How much does it cost the US to service its debt ?
Latest available data as of: 31-12-2025
In summary
interest expense is currently equivalent to 4.7% of GDP and has increased vs previous quarter
such level is high from a historical standpoint
IntroInterest expense on government debt is the cost a government incurs by paying interest on its outstanding loans, primarily through the issuance of securities like Treasury bonds and bills.
Economic implicationsThis expense is a significant factor in government budgets, representing a substantial portion of total expenditures. The amount of interest paid depends on the total national debt as well as the interest rates at which the government borrows money.
A notable increase in interest rates can lead to a substantial rise in these costs, potentially impacting (=taking away from) other areas of the budget.
Market implicationsRising interest rates will on government debt will have a direct impact on the bond markets, rising bond yields (=lowering their prices) in parallel.