The U.S. Treasury may need to borrow more than $2 trillion from private markets in fiscal 2026, according to the Treasury Department's latest Quarterly Refunding documents released Wednesday.

Primary dealers surveyed in the Treasury presentation estimated privately-held net marketable borrowing at roughly $2.04 trillion in FY2026, with borrowing needs expected to remain above $2 trillion through FY2028.

The documents also showed the Office of Management and Budget projected a $2.065 trillion fiscal 2026 deficit, compared with a lower $1.853 trillion estimate from the Congressional Budget Office.

The estimates come as U.S. national debt approaches $39 trillion and financing costs continue climbing alongside elevated Treasury yields. Treasury projected borrowing of $189 billion in the third quarter and $671 billion in the fourth quarter of fiscal 2026.

Rising Financing Costs

The borrowing projections come as rising Treasury yields sharply increase the government's financing burden.

Thirty-year Treasury yields recently climbed back toward the 5% level, while annual federal interest payments have surged above $1.2 trillion as older debt gets refinanced at higher rates.

The Congressional Budget Office previously estimated the government paid nearly $530 billion in interest during the first half of fiscal 2026 alone.

Markets have also scaled back expectations for Federal Reserve rate cuts as policymakers warn inflation pressures tied to energy costs, tariffs and geopolitical tensions could persist longer than expected.

Debt Warnings Grow

The Treasury's growing borrowing needs have intensified concerns about the long-term fiscal outlook.

Federal Reserve Chair Jerome Powell recently described the U.S. debt path as "unsustainable," while economist Mohamed El-Erian warned rising debt issuance could pressure Treasury yields and worsen financing conditions.

JPMorgan Chase & Co. ( JPM ) (NYSE:JPM)  CEO Jamie Dimon also warned that rising deficits and sticky inflation could eventually trigger a "bond crisis," saying markets may be underestimating the risks tied to persistent government borrowing.

U.S. debt recently climbed above 100% of GDP for the first time since World War II, according to Bureau of Economic Analysis data.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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