The gross national debt passed $40 trillion for the first time last month. Through the first ten months of the fiscal year the government spent $931 billion servicing it, eleven percent more than the year before. The deficit for the year is projected at $2.1 trillion. These numbers get discussed as politics. They are better understood as a forecast for the long end of the bond market, which is where your mortgage rate and your retirement portfolio actually live.

Interest Is Now A Major Budget Line

Nine hundred and thirty one billion dollars in ten months is not a rounding error inside a large budget. It is one of the largest single expenditures the federal government makes, and unlike most of them it is not discretionary. It gets paid before anything is debated.

The mechanism that makes it grow is straightforward. Debt issued years ago at very low rates keeps maturing, and it gets replaced at today's rates. Every refinancing cycle swaps cheap debt for expensive debt, and the interest line ratchets up even if the government borrows nothing new.

Why This Reaches Your Mortgage

Heavy Treasury issuance means a lot of bonds looking for buyers. Buyers who have plenty of supply to choose from demand a higher yield. That is why the thirty year Treasury has been trading above five percent.

Mortgage rates are priced off that long end, not off the Federal Reserve's overnight rate. Which is why the Fed can hold or cut and mortgages can sit still or rise anyway. Households keep waiting for the Fed to fix housing affordability. The Fed is not the variable that does it.

What It Means For Savers

Here the news runs the other way. A government paying more to borrow is a government paying you more to lend. Treasury bills and notes are yielding more than most bank savings accounts by a wide margin, and that spread is the direct household consequence of the fiscal picture.

Final Take

Two moves follow from this, and neither requires a view on politics.

If you hold cash in a bank savings account earning under one percent, you are financing your bank's profit while the Treasury is publicly offering substantially more for the same money. A Treasury money market fund or a short bill ladder takes an afternoon to set up and is backed by the same government whose borrowing created the yield.

If you are waiting for mortgage rates to fall before buying or refinancing, understand what you are actually waiting for. It is not a Fed decision. It is a sustained drop in long term yields, which requires either lower inflation expectations or lighter government borrowing. Neither is currently in evidence.

The debt number is not something you can do anything about. The yield it produces is sitting in your account statement right now, and that part is yours.

Written by Deniss Slinkins
Millionaire Core