The United States closed its fiscal year with debt held by the public larger than the economy that carries it. Debt held outside the government stood at 32.2 trillion dollars on September 30, equal to 100.03 percent of GDP, up from 99.4 percent at the end of fiscal 2025. It is the first fiscal year end above 100 percent since 1946, when the ratio reached a record 106 percent on Second World War borrowing, and it follows an intrayear reading of 100.2 percent at the end of the first quarter of this year.
The flow behind the stock is a deficit that stays large in good times. The Treasury reported on October 16 that the fiscal 2026 deficit totalled 1.992 trillion dollars, or 6.2 percent of GDP, in a year when real growth ran at 3.4 percent in the third quarter and unemployment remained low. Reporting on the figures cited rising interest costs on the debt itself among the drivers, alongside mandatory spending. The ratio has roughly tripled since 2000, when debt held by the public stood at 33.7 percent of GDP and was falling.
Debt held by the public is the measure economists prefer because it counts what the government owes investors, including the Federal Reserve and foreign holders, and excludes the roughly 8 trillion dollars one part of the government owes another. Gross federal debt, on that broader definition, has passed 40 trillion dollars. Congressional Budget Office projections cited in the reporting have the public ratio reaching about 120 percent of GDP by 2036 if current policies hold.
For rates, the arithmetic is the story of the year in one ratio. A government borrowing about 2 trillion dollars a year at a 10 year cost near 5 percent competes for the same duration demand that just pushed yields lower on a risk off day. Thursday’s rally showed investors will still buy Treasuries when equities fall. The fiscal path says the supply they are asked to absorb keeps growing regardless of the cycle, which is why the term premium debate, not the next Fed meeting, is the long end’s real question.