“It’s the first thing I read every morning.” — Annie Lamont, co-founder of Oak HC/FT.
1. The U.S. budget deficit climbed to nearly $2 trillion in the fiscal year that ended Sept. 30, according to the Congressional Budget Office, deepening the federal government’s persistent red-ink trend. The $1.993 trillion deficit was 12% above the 2025 level in nominal dollars, reaching the highest level since 2021. The U.S. spent $7.4 trillion last year, up 6%, and it collected $5.4 trillion in revenue, up 3%. The deficit also stayed high as a share of gross domestic product, the metric that economists watch closely. Although the final fiscal 2026 GDP number hasn’t been released yet, budget experts expect the deficit to surpass 6% of GDP, compared with 5.8% in fiscal 2025. (Source: wsj.com)
2. Congressional Budget Office Director Phillip Swagel warned the idea of embracing faster economic growth as the solution for reining in the US federal debt — one being championed by Treasury Secretary Scott Bessent — is unlikely to work. “Growth will help, but it’s probably not plausible that growth alone will stabilize our fiscal trajectory,” Swagel said at a Minneapolis event Thursday. The US would need to grow at least 5% annually to stabilize the levels of federal debt, he said, assuming an interest-rate level of 4%. A 5% level of rates would need 6% GDP gains, after adjusting for inflation, he said. Currently, five-year US Treasury yields are just over 5%. Nominal GDP, which is unadjusted for inflation, would need to have sustained increases of 7% to 8% “to keep the debt ratio stable,” Swagel said. “It’s pretty challenging.” (Source: bloomberg.com)
3. The Congressional Budget Office (yesterday) released an analysis of the impact of higher interest rates on the national debt relative to its February 2026 baseline. Today, the 10-year Treasury yield closed more than 100 basis points above CBO’s prior projections, while the 3-month rate closed about 95 basis points higher. CBO estimates that if rates average 50 basis points above their projections through 2036, deficits would grow by nearly $2 trillion. If they average 150 basis points higher, deficits would grow by $6 trillion. (Sources: crfb.org, cbo.gov, home.treasury.gov)
4. US benchmark borrowing costs risk hitting 6 per cent for the first time in 26 years as fears over high oil prices, inflation and America’s towering public debt roil the world’s most important bond market, Pimco has warned. Dan Ivascyn, chief investment officer at bond giant Pimco, said that a further sharp rise in 10-year Treasury yields — from the current level of 5.29 per cent — is “feasible” as investors like hedge funds are forced to ditch their losing bets on bonds following weeks of heavy selling in the $32 trillion market. (Source: ft.com)
