Given July's spending, and the administration's continued escalation of its Iran war, its is increasingly clear that the Trump administration has no intention of reining in spending in any meaningful way, and we can expect enormous amounts of new federal government debt to be in search of buyers in coming years. 

These large deficits will, of course, further add to the federal government's total national debt, which now has nearly reached $40.1 trillion. Although the new deficit added this fiscal year is, so far, $1.7 trillion, the total added to the overall debt is more than $1.9 trillion. 

This continues to drive very large debt-service obligations, and according the Treasury report, the US government paid out more than $117 billion during July alone. So far in this fiscal year, the US government has paid out more than $1.1 trillion in interest on the debt, and is expected to pay more than $1.3 trillion by the end of the fiscal year on September 30.   

There are many reasons that Treasury yields might increase, but given the current fiscal situation in the United States, the most likely dominant factor behind the current upward surge in the demand for higher yields is this: investors expect that federal deficits will further rise and will flood the market with trillions in new Treasurys in coming years. Moreover, price-inflation metrics show that inflation isn't going away. This will push down demand on long-term bonds. 

To illustrate where we are fiscally right now, let's look at the Treasury Department's most recent monthly report. 

The current fiscal year began in October, so we are now ten months in. The cumulative deficit, so far, for fiscal year 2026 is $1.79 trillion. Even when adjusted for CPI inflation, that's the largest deficit in five years, and the largest since the Covid panic when the federal government racked up huge deficits to pay people to stay home and not work. In 2026 dollars, the Covid-era deficits reached beyond an eye-watering $3 trillion, but the current year's deficit, which could reach $2 trillion by the end of the year, is an example of shocking profligacy in a period of anything other than a major pandemic or global war. 

July, after all, showed total federal spending (outlays) at the second highest level ever, even when adjusted for inflation. In July alone, federal spending totaled $766 billion, which was second only to July 2020's spending total of $807 billion.