The average interest rate the U.S. Treasury pays across all of its outstanding debt reached 3.447% at the end of July, up from 3.409% in June and the highest monthly reading since June 2009. Treasury published the figure in its Average Interest Rates on U.S. Treasury Securities dataset, which covers every bill, note, bond and non-marketable security the federal government has outstanding. The July reading extends a climb that has now run for six consecutive months. What separates this month’s print from the last several is where the increase came from. Treasury bills, which reprice within weeks, got cheaper over the past year, falling to 3.758% from 4.314% in July 2025. Treasury notes moved the opposite way, rising to 3.309% from 3.073%. Notes are the single largest block of federal debt at $16.17 trillion, so the note stack sets the direction of the blended rate. Every low-coupon note issued during the 2020 and 2021 borrowing wave that matures now gets replaced at yields above 4%. That mechanical swap, not the Federal Reserve’s target range, is what is pushing the government’s average borrowing cost back toward levels last seen in mid-2009. The prime rate holds at 6.75% and the national debt closed at $40.03 trillion on August 20.
Key Takeaways
- The average rate on all interest-bearing federal debt hit 3.447% on July 31, the highest since June 2009.
- The rate has risen in each of the last six months, from 3.316% in January.
- Treasury bill costs fell year over year. The rise is coming from notes repricing at maturity.
- Gross interest on Treasury securities reached $1.17 trillion in the first ten months of fiscal 2026.
- The prime rate stays at 6.75%. Nothing in this dataset changes it before the September FOMC meeting.
What Treasury Reported
Treasury’s monthly average interest rate table put the figure for total interest-bearing debt at 3.447% as of July 31, 2026. The last month with a higher reading was June 2009, at 3.456%. The series begins in January 2001 at 6.594%, fell to an all-time low of 1.556% in January 2022, and has climbed for most of the four years since. The monthly path this year runs 3.316% in January, 3.320% in February, 3.327% in March, 3.340% in April, 3.353% in May and 3.409% in June. June and July together added 9.4 basis points, the fastest two-month increase since November 2023.
The components tell a more useful story than the headline number. At July 31 Treasury bills carried an average rate of 3.758%, notes 3.309%, bonds 3.442%, inflation-protected securities 1.127% and floating rate notes 3.948%. Total marketable debt averaged 3.443% and non-marketable debt, which is mostly the Government Account Series held by federal trust funds, averaged 3.463%. The TIPS figure looks low because it reflects only the stated coupon and excludes the inflation compensation Treasury accrues separately. That accrual ran $13.68 billion in July alone.
Where the Increase Is Coming From
Bills are the part of the debt that tracks Fed policy most closely, and bills got cheaper this year. The average bill rate fell to 3.758% in July from 4.314% a year earlier, a drop of 55.6 basis points that follows the cuts the Federal Open Market Committee delivered before it stopped. If bills drove the blended number, the average rate on the debt would be falling. It is rising because notes are doing the opposite. The average note rate climbed to 3.309% from 3.073% a year ago and from 1.396% at the January 2022 trough.
Size explains why notes win the argument. Of $31.46 trillion in marketable debt outstanding at the end of July, notes account for $16.17 trillion, bills $6.99 trillion, bonds $5.49 trillion, TIPS $2.15 trillion and floating rate notes $652 billion. Notes carry original maturities of two to ten years, which means the government is now refinancing paper sold in 2020, 2021 and 2022 at coupons that averaged under 1.5%. Replacement yields are running above 4%. The most recent two-year note stopped at 4.315% in July and the ten-year at 4.683% on August 12. Each of those swaps lifts the blended rate a little, and the swaps continue regardless of what the Fed does in September.
What the Higher Rate Costs
Gross interest on Treasury debt securities reached $1.17 trillion in the first ten months of fiscal 2026, according to Treasury’s interest expense dataset, with $117.6 billion of that accruing in July alone. The figure covers securities held by the public and by federal trust funds. Applying July’s 3.447% average to the $39.77 trillion of total public debt outstanding reported on July 31 produces an annualized run rate near $1.37 trillion. That is a scale estimate rather than a forecast, because the average rate keeps moving as securities mature.
The denominator keeps growing alongside the rate. Debt to the Penny closed at $40.03 trillion on August 20, the third consecutive business day above $40 trillion after the first close above that mark on August 18. At July 31 the Monthly Statement of the Public Debt split the total into $32.05 trillion held by the public and $7.73 trillion held in intragovernmental accounts. A rising average rate applied to a rising balance compounds in one direction only, and it does so without a single new policy decision. Readers tracking the running total can follow it on the national debt page and the interest on the debt tracker.
What This Means for Your Rates
None of this moves the prime rate on its own. The Federal Reserve’s H.15 release for August 21 shows the bank prime loan rate at 6.75% and the discount window primary credit rate at 3.75%, unchanged since the Committee last adjusted its target range of 3.50% to 3.75%. The Committee held that range on July 29 by a vote of nine to three, with all three dissenters preferring a quarter-point increase, and it does not meet again until September 15 and 16. Anything indexed to prime, including most credit card APRs and home equity lines, stays where it is until then.
What Treasury’s borrowing costs do influence is everything priced off the curve. The two-year note yielded 4.19% on August 20, the ten-year 4.69% and the 30-year 5.23%. Those yields set the floor under mortgage pricing, auto loan pricing and the rates banks advertise on term deposits. A government paying more to roll its own paper is competing with banks for the same savings, which is why CD yields and high-yield savings rates have stayed elevated through a year of Fed inaction. The rate forecast for the rest of 2026 turns on the September vote, not on this dataset.
If you hold cash, watch the two-year note rather than the prime rate. Treasury has to keep refinancing at these levels whether or not the Fed moves in September, and banks price two-year and five-year CDs against that same paper. If you carry a balance on anything tied to prime, the opposite logic applies. Your rate is frozen at 6.75% plus your margin until the Committee acts, so use the window to pay down principal rather than waiting for relief.
Frequently Asked Questions
What is the average interest rate on the U.S. national debt?
The average interest rate on all interest-bearing U.S. federal debt was 3.447% as of July 31, 2026, according to Treasury’s monthly average interest rate dataset. That is up from 3.409% in June and is the highest monthly reading since June 2009.
How much interest is owed on the U.S. national debt?
Gross interest on Treasury debt securities totaled $1.17 trillion over the first ten months of fiscal 2026, which began on October 1, 2025. July alone accrued $117.6 billion. That total includes interest credited to federal trust funds as well as interest paid to outside holders, so the cash cost to taxpayers is smaller than the gross figure. Treasury publishes the breakdown monthly in its interest expense dataset, and the fiscal year closes on September 30. Two more monthly accruals will land before that date.
Why is the U.S. national debt so high?
The debt grows whenever the government spends more than it collects, and the federal budget has run a deficit in every fiscal year since 2001. Cumulative borrowing pushed the total above $40 trillion for the first time on August 18, 2026. Interest is now part of the loop. A higher average rate raises outlays, larger outlays widen the deficit, and the wider deficit requires more borrowing at whatever yield the market demands that day. Gross interest has already reached $1.17 trillion this fiscal year.
How much would each American have to pay to pay off the national debt?
Dividing the $40.03 trillion balance from August 20 by the Bureau of Economic Analysis population estimate of 342.8 million for June 2026 gives roughly $116,800 per person. Using households rather than individuals produces a much larger number, and using taxpayers rather than residents produces a larger one still, which is why published per-person figures vary. The calculation is a scale illustration, not a bill anyone receives, and no individual is liable for a share of federal borrowing. Treasury updates the balance every business day in its Debt to the Penny release.
Will the average rate on the debt keep rising?
It rises as long as maturing securities carry coupons below current market yields. The average note rate is 3.309% while the last two-year note sold stopped at 4.315%, so each refinancing lifts the blend. That gap closes only if market yields fall below the average rate on the existing stack. Bills are the exception and have already turned lower year over year, because they reprice fast enough to follow the Fed down. Notes are $16.17 trillion of the $31.46 trillion marketable total, so the note math dominates the blended figure for now.
Does the government’s borrowing cost change my loan rate?
Indirectly, and only for products priced off Treasury yields. Mortgages track the ten-year note, which yielded 4.69% on August 20, and auto lenders and CD issuers price against the two-year and five-year. Anything tied to the prime rate works differently. Prime sits three percentage points above the top of the Fed’s target range, so it holds at 6.75% until the Federal Open Market Committee changes that range. The next scheduled opportunity is the meeting on September 15 and 16. Treasury’s own borrowing cost has no direct channel into a prime-indexed balance.
Watching the Next Print
Treasury posts the August average interest rate table in early September, days before the Federal Open Market Committee meets. A seventh consecutive increase would confirm that the refinancing wave, rather than policy, is setting the government’s borrowing cost. Track the running balance on the national debt tracker, the policy path on the Fed meeting schedule, and the market yields that drive it all on the Treasury yield curve.
References
- U.S. Treasury Fiscal Data. Average Interest Rates on U.S. Treasury Securities. Full history to July 31, 2026.
- U.S. Treasury Fiscal Data. Interest Expense on the Public Debt Outstanding. July 2026 and fiscal year to date.
- U.S. Treasury Fiscal Data. Debt to the Penny. Total public debt outstanding, August 20, 2026.
- U.S. Treasury Fiscal Data. Monthly Statement of the Public Debt. Securities outstanding, July 31, 2026.
- Federal Reserve Board. H.15 Selected Interest Rates. Prime rate and Treasury yields, August 21, 2026.
- Federal Reserve Board. FOMC Statement, July 29, 2026. Target range and nine to three vote.
- Federal Reserve Board. FOMC Meeting Calendars. September 15 and 16, 2026 meeting.
- TreasuryDirect. Auction Announcements, Data and Results. Two-year and ten-year auction stops, July and August 2026.
- FRED. Population. Bureau of Economic Analysis monthly population estimate, June 2026.
