$XAG U.S. Debt Alert: Interest Payments Surpass Defense Spending
In Q3 2025, U.S. interest payments reached $981B, translating to over $1.2 trillion annualized—exceeding the projected 2026 defense budget (~$900B).
In Q1 2026 alone, interest payments rose 13% year-over-year to $179B, now consuming 19% of federal revenue, and projected to reach 22% by 2035. Every fifth dollar collected goes to servicing debt before funding defense, Medicare, or Social Security.
Treasury auctions are showing signs of strain:
August 2025’s 10-year auction tailed by 1.1 bps, first in six months
Bid-to-cover ratios declining
Primary dealers absorbing more supply as real buyers step back
The refinancing wall looms large: trillions in Treasuries mature over the next 24 months, rolling into higher rates. Average marketable debt yields rose to 3.36%, up from 1.55% five years ago.
Policymakers face tough choices:
Accept higher yields → deeper deficits → accelerating debt spiral
Fed intervention (Yield Curve Control) → potential currency debasement
Global capital flows are shifting: Japan’s 30-year yields are spiking, and foreign purchases are declining. Meanwhile:
Gold: $4,596
Silver: $90
Commodities: surging
This is not just inflation—it’s confidence erosion. Bond markets may move quietly, but rising interest payments over defense spending is a critical warning signal.
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