Data released by the U.S. Treasury Department on Friday showed that the federal budget deficit reached $1.97 trillion in the first 11 months of fiscal year 2026 (through August), one of the highest levels on record. Net interest outlays during the same period accumulated to $1 trillion, surpassing this threshold for the first time and exceeding defense and all other major spending categories. In response, markets began pricing in a self-reinforcing debt spiral, with U.S. Treasury yields rising to multi-year highs this week. The 2-year yield briefly touched 4.66% on Friday, while the 10-year yield reached 4.98%. The average interest rate on marketable Treasury debt has risen to 3.48%. U.S. Treasury Secretary Scott Bessent has pledged to unveil a fiscal consolidation plan in the coming weeks or months.