Goldman Sachs Warns Higher Rates Could Push US Debt-to-GDP to 132% by 2035

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Goldman Sachs strategist Pierfrancesco Mei warned in a note Tuesday that persistently higher interest rates could push the US debt-to-GDP ratio to 132% by 2035, 10 percentage points above the firm's baseline, raising the odds that deficit reduction becomes necessary sooner to stabilize the debt. The benchmark 10-year Treasury yield has surged more than 115 basis points this year, from around 4.10% late last year to a 24-year high of around 5.28%, a sell-off fueled by inflation from the US war on Iran that prompted the Federal Reserve to hike rates last month. According to new analysis from bond investment firm DoubleLine, US annual interest expense has risen to a record 18.5% of federal government revenue, above the previous record of 18.4% set in 1991, and now stands at a record $1.25 trillion, more than four times the 1991 level. Carlyle Group co-founder David Rubenstein said on the Power Players with Brian Sozzi podcast that with $40 trillion of debt, the US has crossed the historical threshold where interest payments exceed national security spending, a sign of weakness.

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