Average interest rate on the debt

Why it lags the market

The average rate moves far more slowly than the rates in the news. The reason is duration. The debt is a stack of securities issued over decades, and each one keeps paying the rate it was sold at until it matures. Only when a security matures and is replaced does the new market rate touch the average. With an average maturity of several years, the whole stock takes a long time to reprice.

Why the gap between average and new is the number to watch

The useful comparison is between the average rate on everything outstanding and the rate on new borrowing. When new borrowing is more expensive than the average, every rollover lifts the bill a little and the average climbs towards the market rate on its own, without anyone deciding anything. That gap is next year’s increase in interest, already set. When new borrowing is cheaper than the average, the same mechanism runs in reverse.

What the published figure leaves out

The Treasury’s published average excludes inflation-protected securities and floating rate notes, whose rates are not fixed coupons and cannot be averaged the same way. The exclusion is small, but it means the figure describes most of the debt rather than all of it, which is why this site repeats the exclusion wherever it uses the number.