The Congressional Budget Office released an analysis showing the US fiscal outlook is highly sensitive to interest rates. The 10-year Treasury yield closed more than 100 basis points above CBO's February 2026 baseline, recently trading around 5.1-5.2%. If rates average 50 basis points above baseline through 2036, cumulative deficits grow by about $1.9 trillion; at 150 basis points above, they grow by roughly $6 trillion.
Higher Treasury yields raise the cost of servicing the national debt, which recently crossed $40 trillion. Because much of the debt is short-term and rolls over, rising rates feed quickly into net interest spending. CBO scenarios show net interest could reach 44% to more than 55% of available tax receipts in a decade, compared with about 31% of projected receipts over the period in the harsher scenario.
The CBO says if interest rates average 150 basis points above its February 2026 projections through 2036, deficits would grow by roughly $6 trillion, and debt could reach as high as 133% of GDP with deficits near 8.8% of GDP by 2036.
BThe Kobeissi Letter just posted a chart that should scare anyone who pays taxes.
BIf interest rates stay about a point and a half above what the CBO expected, US deficits grow by nearly SIX trillion dollars by 2036.
BThe deficit would hit 8.8 percent of GDP. Highest since World War Two.
AThis is the thing nobody wants to talk about. The 10-year is around 5.1 percent right now.
AThe CBO's February projections didn't have it that high. Not even close.
BRight, and here's the part that keeps me up. A lot of that debt is short-term paper that rolls over constantly.
BSo every time yields tick up? The interest bill goes up almost immediately.
ALet's put numbers on it. The national debt just crossed forty trillion. Net interest could hit 44 percent of all tax receipts in a decade.
BForty-four cents of every tax dollar going to bondholders before a single road gets paved.
AAnd that's the softer scenario. If rates run hotter, it's over half.
BI'll say it: this is a tax on everyone, and nobody on either side of the aisle wants to touch it.
AHold on. The fix is not to panic. The CBO is running scenarios, not predictions.
BThe scenario is already here! The 10-year is a full point above their baseline! Today!
AThe White House says they can grow their way out. I think that's fantasy, but it's not nothing.
BGrow out of FIVE percent yields? You'd need a miracle, not a policy.
ABut the alternative is cutting spending into a slowing economy. That's a recession recipe.
BI didn't say cut today. I said nobody has a plan at all. That's worse.
AFair. The Committee for a Responsible Federal Budget says the same thing—every interest dollar is a dollar not spent on anything useful.
BAnd the market knows it. That's why the long end is selling off.
BAnother corner of the market: someone on Bluesky asked the only question that matters right now—awake? In this economy?
AI mean, fair. Between the CBO numbers and the AI selloff, who's sleeping?
BMoney Tonight is coming up next, and they'll have the full breakdown of the bond market's ugly afternoon.