U.S. Government's Average Borrowing Rate Continues to Lag New Note Yields
The U.S. government's average borrowing rate remains more than a full percentage point below current yields on newly issued notes as fiscal 2026 concluded with a $2.0 trillion deficit.
📈MarketsPhoto: Seeking Alpha
Key points
- Federal average borrowing rate sits more than one point below new note yields.
- Fiscal 2026 concluded on September 30 with a $2.0 trillion deficit.
- Maturing older debt continues to roll over into higher current interest rates.
Bondholders are closely monitoring a persistent financial dynamic: the federal government's average borrowing rate continues to trail significantly behind the rates it currently offers on fresh debt issuance. According to data highlighting the conclusion of fiscal 2026 on September 30, the government's average borrowing cost remains over a point lower than what it must pay on new notes.
This ongoing lag means that older, lower-yielding debt is still rolling over into higher current rates, a process that gradually increases overall federal interest expenses. For everyday investors and market participants, this structural shift in government financing highlights the broader impact of elevated interest rates on public debt servicing.
The end of the fiscal year also brought into focus the sheer scale of federal borrowing, marked by a $2.0 trillion deficit. As older government securities continue to mature and are replaced by higher-yielding instruments, the broader bond market will feel the continued pressure of rising debt maintenance costs.
What to watch next: Monitor upcoming Treasury auctions and average interest rate trends in future fiscal reports to gauge the pace at which federal borrowing costs are catching up to market yields.
Source Seeking Alpha — seekingalpha.com/article/4968150-average-coupon-is-still-catching-up?so… ↗
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