10-Year Treasury at 5.04%: America's $40 Trillion Debt Bill Comes Due

The 10-year Treasury yield hit 5.04% last week — its highest level since 2007 — the same week the Federal Reserve raised rates for the first time since 2023. Oil prices and inflation lit the match. Mounting government debt sits on every analyst's list of reasons yields keep climbing.

The debt numbers are compounding fast. Gross national debt crossed $40 trillion in August, after hitting $38 trillion in October and $39 trillion in March. That pace works out to a trillion dollars every five months. The deficit reached $2 trillion with a month still left in the fiscal year, according to the Congressional Budget Office.

What has changed on the ratings and interest front?

In 2025, Moody's became the last of the three major credit rating agencies to strip the United States of its AAA rating, joining S&P (2011) and Fitch (2023).

The compounding has already started. In fiscal year 2025, net interest payments hit $970 billion — roughly $150 billion more than the United States spent on national defense — and rose another $111 billion, or 12%, this year, according to CBO data. Interest is now the fastest growing major program in the budget, projected by the Committee for a Responsible Federal Budget to more than double to $2.1 trillion by 2036.

As one Fortune commentary puts it: "We're rolling over an adjustable-rate loan the size of the economy. Last week, the rate adjusted."

Why won't Congress fix it?

For the first 200 years, Congress lived relatively within its means — critics of Keynesian economics called it "old-time fiscal religion." The Congressional Budget Act of 1974 created a process for a budget resolution and 12 appropriations bills. Congress has completed that process on time exactly four times in the half-century since, according to Pew Research. It will not be five this year: with not one of the 12 bills enacted, Congress punted to December 11 so members could campaign first.

A former Senate budget staffer who helped put a budget resolution on the floor in 2022 — then-Senator Mike Braun's attempt to make the Senate do the one thing the Budget Act requires — describes the result. The motion to proceed failed 34–63 and, in the author's words, "didn't garner a single news story." The lesson drawn: "That wasn't a vote against our budget; it was a vote against debating any budget at all."

What fiscal gimmicks hide the deterioration?

• Statutory PAYGO, enacted in 1990 and made permanent in 2010, requires new spending to be offset with new revenues — but the taxes show up later, then conveniently never arrive, as with the Affordable Care Act's deferred and later-repealed revenues.
• "Emergency" designations exempt spending from every fiscal rule, and the PAYGO scorecard — meant to trigger automatic cuts for deficit-increasing laws — is waived with a few words on the last page of every omnibus.
• Cable-news fiscal fights cover only 27% of the budget, discretionary spending, letting politicians ignore mandatory spending (60%) and interest on the debt (13%).

The Pentagon, meanwhile, has failed eight straight audits. In 2022 it could not fully account for 61% of its $3.5 trillion in assets.

What is at stake for the dollar?

The CBO's long-term budget outlooks repeat the same warning: rising debt risks a fiscal crisis in which investors lose confidence, rates rise abruptly, and the dollar's reserve status erodes. Reserve currency status is why the world lends America money cheap and why American sanctions have teeth — and it rests on confidence that the country pays its bills.

Foreign investors already hold a shrinking share of U.S. debt, according to the Bipartisan Policy Center. The commentary's framing: America is "not healthy, just healthier than everybody else in the ward." Britain held reserve status until it didn't. The ratings agencies have spoken, the government's own scorekeeper has put its warning in writing, and, as the author concludes, "Congress is asleep at the wheel."

The bond market's message last week was the rate adjusting on that economy-sized loan. Unless the trajectory changes, the question is not whether yields and interest costs keep climbing — it is whether Washington reads the file before the adjustment becomes a crisis.