The federal deficit for fiscal 2026 stood at $1.97 trillion after 11 months, the Treasury Department said on Sept. 11. That is almost $200 billion more than the same stretch of fiscal 2025, and the full-year total will land close to $2 trillion.
August itself was kinder than expected. The Monthly Treasury Statement showed a $167 billion shortfall against a consensus forecast of $404 billion. That was 61 percent below July’s $432 billion gap and 52 percent below the $345 billion of August 2025.
Revenue down, interest up
Tax receipts came to $360 billion in August. For the fiscal year to date they total nearly $4.9 trillion, slightly under the $5.2 trillion collected over the same 11 months a year earlier. Spending slowed to $527 billion for the month. Social Security was the largest item at $141 billion, followed by net interest at $86 billion, healthcare at $81 billion and national defense at $72 billion.
The year-to-date figures carry a bigger message. Debt-servicing costs passed the $1 trillion mark in August and overtook Medicare as the government’s second-largest expenditure. Only Social Security, above $1.5 trillion, is larger. Interest is expected to take a growing share of the budget from here. The national debt reached $40.048 trillion on Sept. 10, and Treasury yields keep climbing to their highest levels in years.
Bond market under strain
Investors had a rough week. President Donald Trump pledged $5,000 checks to Americans if Republicans hold a majority in Congress after the November midterms, and repeated the promise in a Sept. 11 Truth Social post: “When I say something, I mean it! The $5,000 Dividend will happen because the People of our Country deserve it.”
Treasury Secretary Scott Bessent is trying to pull long-dated yields down by combining debt buybacks with heavier issuance of short-term T-bills. The department ran two $12.5 billion buybacks on Sept. 3 and Sept. 9, which with the liquidity operations brought the week’s total to $31 billion. Twelve more buybacks, from $500 million to $4 billion each, are scheduled.
The market was not persuaded. The 10-year and 30-year yields ended the week at 4.97 percent and 5.36 percent. Adam Turnquist, chief technical strategist at LPL Financial, told The Epoch Times in a note that yields had moved “two-steps-forward, one-step-back” for much of the year, but that “rates appear to have traded the stairs for the elevator” over the past month. He sees little relief ahead: “Momentum indicators continue to point toward higher yields.”
Persistent war-driven inflation, fiscal worries and expectations for Federal Reserve policy have all fed the climb. After August’s Consumer Price Index, futures markets fully priced in a quarter-point rate hike at the following week’s Federal Open Market Committee meeting.
One auction added a wrinkle. On Sept. 10 the Treasury sold $22 billion of 30-year bonds. Primary dealers, mostly Wall Street banks, took only about $485 million. Indirect bidders, generally foreign central banks, bought almost $17.5 billion.
