On September 14, the ten-year Treasury yield topped 5 percent for only the second time since 2007. The yield has risen roughly half a percentage point in just two months and has tripled since the start of 2022. The yields are now more than 80 basis points above what the Congressional Budget Office projected for 2026.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget (CRFB), captured the moment precisely: "The era of low interest rates is long over. The trillions of dollars borrowed under the premise that money was free is now costing us dearly."
It didn't have to be this way.
Thirteen years ago, my colleague Todd Buchholz and I made a case: when interest rates are at historic lows, lock in those rates for at least a portion of the debt by issuing 50- and 100-year bonds.
We weren't alone. Disney understood this concept well enough to issue 100-year bonds in 1993. Norfolk Southern did so in 2005 and again in 2010. Yale, the University of Pennsylvania, Ohio State, and dozens of corporations followed the same logic.
Yet the U.S. Treasury, with vastly greater resources and responsibility, chose differently.
As recently as 2024, the Treasury's weighted-average maturity stood at 5.9 years—well below what it could have achieved had it committed to issuing ultra-long bonds. This wasn't a technical oversight. It was a choice. Shorter-term borrowing reduced interest costs in the near term but exposed taxpayers to greater refinancing risk.
The scale of that risk is enormous: the Government Accountability Office estimates that Treasury must refinance $9.7 trillion of maturing securities at market interest rates in fiscal 2026.
During 2020-21, when 10-year Treasury yields were around 1.5 percent or less, reaching as low as 0.55 percent, the Treasury had an unprecedented opportunity. The Federal Reserve purchased Treasury securities to support the pandemic response. There was no guarantee rates that low would ever return.
Treasury initially relied heavily on short-term bills to meet the extraordinary cash needs of the early pandemic. But beginning in May 2020, it shifted substantially toward slightly longer-term debt, increasing issuance of 2-, 3-, 5-, 7-, and 10-year notes and 30-year bonds. By September 2021, the weighted-average maturity of Treasury debt had risen from 62 months to 72 months. Yet even as it extended maturities, Treasury declined to issue the 50- and 100-year bonds that could have locked in the exceptionally low rates available.
This wasn't passive neglect. Treasury's Borrowing Advisory Committee repeatedly considered ultra-long debt, including 50- and 100-year bonds, but Treasury never issued beyond the 30-year maturity.
Today, federal net interest costs have reached a record 3.3 percent of GDP. Interest payments have topped $1 trillion this year, nearly tripling from $345 billion in 2020. CBO projects that by FY2036, annual interest payments will surpass $2.1 trillion—roughly double today's level. But that dire outlook is already being challenged by interest rates running well above CBO's February 2026 assumptions.
CRFB estimates that if interest rates remain just one percentage point above CBO's projections through the decade—raising the average 10-year Treasury yield from 4.3 percent to 5.3 percent—the additional borrowing costs would add $3.5 trillion to the national debt. By 2036, annual interest costs would reach $2.7 trillion, consuming nearly 6 percent of GDP, while debt held by the public would rise to 128 percent of GDP, compared with 120 percent under CBO's baseline.
This is no longer merely a hypothetical risk. At today's rates, net interest is already larger than federal spending on any mandatory program other than Social Security and Medicare.
The mechanism was straightforward. When 10-year rates were at 0.55 to 2.5 percent, longer-term debt would have carried marginally higher interest rates. But it would have sharply reduced the risk of refinancing that debt at substantially higher rates. Instead, Treasury prioritized near-term savings over long-term security, betting—or hoping—that rates would stay low forever.
While the U.S. Treasury dithered, at least 14 countries, including Austria, Belgium, Mexico, and Ireland took the opposite approach and issued ultra-long bonds. They understood what Washington did not: locking in rates when they are historically low is elementary risk management.
Anyone paying attention understood that short-term debt meant future refinancing risk. The benefits of shorter-term borrowing were immediate. The risks of refinancing would fall largely on future Treasury officials and future taxpayers.
That future is now. Interest on the national debt now runs more than $3 billion a day. Interest payments have nearly tripled since 2020 and are the fastest-growing part of the federal budget.
As Phillip Swagel, CBO’s director, put it: "It's a slow spiral, but it's still a spiral — of rising debt and rising payments on the debt."
This wasn't inevitable. It was a choice.
