The U.S. national debt stood at $39.35 trillion as of June 29, 2026, according to the Treasury's Debt to the Penny data, up $3.13 trillion from $36.21 trillion on June 30, 2025 [1]. Debt held by the public, the part that has to be financed in the bond market, was $31.62 trillion, up $2.67 trillion in twelve months [1]. Interest is the fastest growing line in the budget: gross interest on Treasury debt securities reached $866.8 billion in the first eight months of fiscal 2026 (October 2025 through May 2026), compared with $776.3 billion in the same period a year earlier, an increase of 11.7% [2]. This note walks through what the national debt and interest cost figures show, why the interest bill keeps rising even after the Federal Reserve cut rates, and what the numbers imply for growth and financial markets.
How big is the U.S. national debt in 2026?
The Treasury reports the debt every business day. On June 29, 2026 the total public debt outstanding was $39,345 billion. Of that, $31,621 billion was held by the public (investors, banks, foreign official holders and the Federal Reserve) and $7,724 billion was intragovernmental debt owed to federal trust funds such as Social Security [1]. Twelve months earlier, on June 30, 2025, the total was $36,211 billion and debt held by the public was $28,953 billion [1]. The year over year increase in total debt was therefore about 8.7%.
Nominal GDP was running at an annual rate of $31,866 billion in the first quarter of 2026, based on the latest quarterly figure in DataPorium's economic metrics [4]. Set against that base, total debt is roughly 123% of GDP and debt held by the public is roughly 99% of GDP. In plain terms, the federal government now owes the public an amount close to one full year of national output.
Why debt held by the public is the number that matters
Intragovernmental debt is an accounting claim between parts of the same government. Debt held by the public is what the Treasury must roll over and refinance in auctions, and it is the figure that competes with private borrowers for savings. Its growth of $2.67 trillion in a year is a direct measure of how much new saving, domestic and foreign, was absorbed by federal borrowing rather than by private investment [1].
Why interest costs are rising even though the Fed cut rates
The effective federal funds rate was 3.63% in June 2026, down from 4.33% a year earlier and from 5.33% in mid 2024 [4]. Lower short term rates would normally reduce the government's borrowing cost, and they did on Treasury bills: the average interest rate on outstanding bills fell to 3.690% at the end of May 2026 from 4.316% at the end of May 2025 [3]. But the average rate on Treasury notes rose to 3.248% from 3.008%, and on bonds to 3.413% from 3.278%, because older low coupon securities issued between 2012 and 2021 keep maturing and are refinanced at today's higher yields [3]. The result is that the average rate on all interest bearing debt rose to 3.353% from 3.294% [3].
A rising average rate applied to a rising stock of debt produces a compounding interest bill. The Monthly Treasury Statement lists the full year budget estimate for gross interest on Treasury debt securities at $1,301 billion for fiscal 2026, versus $866.8 billion recorded through May [2]. Net interest, which excludes interest paid to trust funds and other government accounts, was $723 billion in the first eight months of the fiscal year, already larger than the $631 billion spent on national defense over the same period [2].
| Measure | Latest | Year earlier |
|---|---|---|
| Total public debt (June 29, 2026) | $39.35 trillion | $36.21 trillion |
| Debt held by the public | $31.62 trillion | $28.95 trillion |
| Gross interest, fiscal year to date (through May) | $866.8 billion | $776.3 billion |
| Average rate on interest bearing debt (May 31) | 3.353% | 3.294% |
| Average rate on Treasury bills | 3.690% | 4.316% |
| Average rate on Treasury notes | 3.248% | 3.008% |
Sources for the table: Treasury Debt to the Penny [1], Monthly Treasury Statement for May 2026 [2], Treasury average interest rates [3].
What the fiscal 2026 deficit looks like so far
Through May 2026 the federal government collected $3,656 billion in receipts and spent $4,902 billion, for a deficit of $1,246 billion [2]. That is $118 billion smaller than the $1,364 billion deficit recorded in the same eight months of fiscal 2025, mostly because receipts rose 5.0% while outlays rose 1.2% [2]. Customs duties were a notable contributor on the receipts side, at $188.6 billion year to date compared with $81.4 billion a year earlier [2]. The full year budget estimate in the same statement projects outlays of $7,540 billion and receipts of $5,476 billion for fiscal 2026 [2].
Two facts stand out. First, a smaller deficit is still a very large deficit: the government is borrowing roughly one dollar of every four it spends. Second, interest is crowding out everything else. When $1.3 trillion a year goes to bondholders, that money is not available for tax relief, defense, or debt reduction, and it must itself be borrowed.
The interest rate and growth equation
- If the average interest rate on the debt stays below the growth rate of nominal GDP, the debt ratio can stabilize even with modest primary deficits.
- If the average rate rises above nominal growth, the debt ratio rises on its own, with no new spending required.
- The average rate on the debt (3.35%) is still below recent nominal GDP growth, but the gap has narrowed sharply since 2021, when the average rate was under 2% [3].
What this means for markets and the economy
From a market oriented perspective, the interest figures make the case for fiscal restraint on their own. Every dollar of new borrowing now comes with a coupon near 4%, and the Treasury needs to find buyers for roughly $2.7 trillion of net new public debt a year on top of refinancing maturing securities [1]. Heavy issuance tends to keep longer term yields higher than short term policy rates alone would imply, which feeds back into mortgage rates, corporate borrowing costs and equity valuations. Investors may consider that the long end of the Treasury curve now carries a fiscal risk premium that did not exist a decade ago.
The fair counterpoint is that the United States borrows in its own currency, its debt market is the deepest in the world, and receipts are growing. Those advantages buy time, but they do not change the arithmetic of compounding interest. The most durable fix is faster real growth combined with slower spending growth, so that the denominator of the debt ratio outruns the numerator.
Gross interest on the federal debt is on track to exceed $1.3 trillion in fiscal 2026, more than the government spends on national defense, and the bill rises every year that low coupon debt is refinanced at today's yields.
Key takeaways
- Total U.S. debt was $39.35 trillion on June 29, 2026, up $3.13 trillion in a year; debt held by the public was $31.62 trillion, about 99% of GDP [1][4].
- Gross interest on Treasury debt was $866.8 billion through May of fiscal 2026, up 11.7% from a year earlier; the full year estimate is $1,301 billion [2].
- The average rate on interest bearing debt rose to 3.353% from 3.294% even as bill yields fell, because maturing low coupon notes are refinanced at higher yields [3].
- The fiscal 2026 deficit through May was $1,246 billion, smaller than a year earlier but still about one dollar borrowed for every four spent [2].
- Net interest ($723 billion year to date) now exceeds national defense ($631 billion) in the federal budget [2].
Frequently asked questions
How much is the U.S. national debt right now?
As of June 29, 2026 the total public debt outstanding was $39.35 trillion, of which $31.62 trillion was held by the public and $7.72 trillion was intragovernmental holdings, according to the Treasury's Debt to the Penny dataset [1].
How much does the U.S. pay in interest on the national debt in 2026?
Gross interest on Treasury debt securities was $866.8 billion in the first eight months of fiscal 2026, and the Treasury's full year budget estimate is $1,301 billion; net interest after payments to government trust funds was $723 billion through May [2].
Why are interest costs rising if the Fed lowered rates?
Short term bill rates did fall, but the average rate on notes and bonds keeps rising because securities issued at coupons near 1% to 2% between 2012 and 2021 are maturing and being replaced with debt paying 3.5% to 4.5%, so the average rate on all debt rose to 3.353% in May 2026 [3].
What is the U.S. debt to GDP ratio in 2026?
Using nominal GDP of about $31.9 trillion at an annual rate in the first quarter of 2026, total debt is roughly 123% of GDP and debt held by the public is roughly 99% of GDP [1][4].
