• CBO Director Phillip Swagel said concerns about U.S. debt have a small effect on Treasury yields, according to a newswire item on October 8, 2026.
  • The remarks come amid a sharp Treasury selloff that pushed the 10-year yield to 5.23% in late September, well above CBO's February projection of 4.1% for 2026.
  • Swagel's September analysis warns that persistently higher interest rates could add $1.5 trillion to deficits over the next decade, highlighting the feedback loop between borrowing costs and fiscal health.

Limited Impact, But Not Without Risk

Concerns about the federal debt are playing only a minor role in driving Treasury yields, according to Phillip Swagel, director of the Congressional Budget Office. The comment, reported by a newswire on October 8, 2026, suggests that while fiscal worries loom large in policy debates, they are not yet a dominant force in bond markets.

The remarks came during a period of turbulence for Treasuries. In late September, the 10-year yield spiked to 5.23%, a level far above the CBO's February projection of a 4.1% annual average for 2026. Market participants attributed the selloff to a mix of factors, including energy-price pressures linked to Middle East conflict, robust economic activity, heavy federal borrowing, and a surge in AI-related investment. Absent from the list: debt concerns as a primary driver.

Swagel's assessment aligns with his earlier analyses. In a September 24 response to Senate Budget Committee ranking member Jeff Merkley, the CBO modeled a scenario in which the government's average borrowing rate gradually rises 1 percentage point above baseline. That scenario would add roughly $1.5 trillion to cumulative deficits over fiscal years 2026–2036 and push publicly held debt to 222% of GDP by 2056, versus 175% in the baseline. However, the CBO explicitly notes that the economic consequences depend on why rates rise, and it does not attribute the increase to debt anxiety alone.

The Feedback Loop

While debt concerns may not be spooking bond investors today, the relationship between yields and fiscal health is hardly benign. Higher interest rates increase the cost of servicing the debt, which in turn widens deficits and forces more borrowing—a feedback loop that can push rates even higher. The CBO's September analysis highlights this dynamic, showing that a sustained rise in borrowing costs would leave fewer resources for private investment and slow economic growth.

However, translating a single Treasury yield into the government's actual financing cost is not straightforward. Existing debt refinances over time, and different maturities carry different rates. The CBO's scenario assumes a gradual increase in the average rate—about 5 basis points annually—rather than an immediate jump across all outstanding debt.

Market Context

The lack of a significant fiscal-risk premium in current yields might reflect investor confidence that Congress will eventually take preventive action, Swagel suggested in an April interview. That view contrasts with warnings from fiscal watchdogs like the Committee for a Responsible Federal Budget, which estimated a roughly $2 trillion deficit for fiscal 2026 and $1.1 trillion in debt-interest costs.

CBO's February baseline projects a $1.9 trillion deficit for fiscal 2026, with publicly held debt reaching 101% of GDP and net interest payments at 3.3% of GDP. By 2036, the deficit is projected to swell to $3.1 trillion, debt to 120% of GDP, and net interest to 4.6% of GDP. These projections assume no policy changes, but they underscore the long-term challenge.

Swagel's latest comment serves as a reminder that while markets may be complacent about the debt, the arithmetic of compounding interest and persistent primary deficits remains a ticking clock. A CBO official did not respond to a request for additional comment on the timing or context of Swagel's remarks.

Correction: An earlier version of this article misstated the source of Swagel's remarks. They were reported by a newswire on October 8, 2026, not at a public event.