Fiscal year 2026 interest costs reached $1.2 trillion—15% higher than a year earlier. It is now the third-largest budget item after Social Security and Medicare.
Bond investors demanded higher yields in August 2026 to finance the growing debt. The 30-year Treasury hit levels not seen since before the 2008 financial crisis.
Higher Treasury yields flow into mortgage rates, which neared 6.7% in late August. Homebuyers face steeper borrowing costs as government debt strains financial markets.
Bitcoin rallied 16% to $80,000 on August 20-21 as investors sought alternatives. Rising debt and yields often increase demand for assets perceived as outside the traditional system.
Outcomes depend on whether fiscal policy tightens, debt management continues with elevated rates, or stress accelerates. Each scenario has different implications for bond yields and crypto demand.
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