U.S. Deficit Estimated at $2 Trillion as Treasury Yields Reach 5%

The U.S. closed fiscal 2026 with an estimated $2.0 trillion deficit as Treasury yields reached 5% or more on key maturities, a combination that can raise refinancing costs as federal debt comes due.

Fiscal 2026 ran from Oct. 1, 2025, through Sept. 30, 2026, and the estimated shortfall was $218 billion larger than the prior fiscal year. On Oct. 14, the five-year Treasury yield was 5.00%, the seven-year yield was 5.09% and the 10-year yield was 5.19%. The daily readings reflect market quotations collected at or near 3:30 p.m. ET (19:30 UTC).

Outlays rose $386 billion, or 6%, over fiscal 2025, while receipts grew $169 billion, or 3%. The figures show federal spending exceeded receipts across the fiscal year, leaving the estimated $2.0 trillion gap.

Higher yields do not reprice every outstanding Treasury security at once. The federal interest bill changes over time as maturing securities are replaced with new borrowing at current rates. Added interest expense can also increase borrowing needs and add to future costs.

The February 2026 budget baseline projected that the 10-year Treasury rate would average 4.3% from 2026 through 2036. It put net interest outlays at $1.0 trillion in 2026, rising to $2.1 trillion by 2036. Before the October fiscal-year estimate, the baseline had projected a $1.9 trillion deficit for 2026, or 5.8% of gross domestic product.

A rate sensitivity analysis tests what might happen if rates stay above the baseline. With rates 50 basis points higher through 2036, cumulative deficits from 2026 to 2036 would be $1.9 trillion larger. With rates 150 basis points higher, the increase would be $6.0 trillion. The calculations hold other economic variables constant and exclude possible effects on gross domestic product, so they are scenarios rather than forecasts.

Households also faced elevated borrowing costs. The average 30-year fixed mortgage rate was 7.40% in the Oct. 8 weekly reading, released at noon ET (16:00 UTC).

The yield readings add a financing-cost dimension to earlier coverage of the federal deficit. The deficit estimate measures the gap between receipts and outlays; the yield figures show borrowing rates as existing securities come due. Any budget effect would build over time through refinancing.