The total annual interest costs on U.S. Federal debt have surpassed the $1.1 trillion mark in the second quarter of the year, with the government now paying a record $3 billion in interest per day on its debt.

According to the economics outlet Kobeissi Letter on the microblogging platform X (formerly known as Twitter), the interest expense on US Federal debt is triple the amount “paid 10 years ago, and has doubled in just 2.5 years.”

Per the outlet, even if the country’s central bank, the Federal Reserve, cuts interest rates by 1% and government bond yields decline by the same amount, daily interest expense will remain at $2.5 billion.

That, the outlet added, would be “more than double the average paid in 2009-2019.”

This is insane:Interest expense on US Federal debt is now at a record $3 billion PER DAY.This is TRIPLE the amount paid 10 years ago and has DOUBLED in just 2.5 years.Total annual interest costs on Federal debt reached a whopping $1.1 trillion in Q2 2024.Even if the Fed… pic.twitter.com/GkLxU4914o

— The Kobeissi Letter (@KobeissiLetter) September 5, 2024

The Federal Reserve started hiking interest rates in 2022 to rein in inflation, and only stopped in late 2023 when the Fed Funds interest rate reached 5.5%. While the market is expecting interest rates to be cut later this month, the country’s debt has kept on rising to now be above $35.3 trillion.

Per Kobeissi Letter, the combination of high interest rates with the country’s growing debts means that interest “has literally become one of the largest annual expenses for the US in a matter of years.”

Notably equities have recently lost  over $1 trillion in market capitalization over a trading session as large-cap tech stocks endured a massive sell-off that saw the price of Nvidia (NVDA), a company that’s been rallying off of AI growth bets, losing over $360 billion in market capitalization including its after-hours move.

On top of Nvidia’s slowing growth, two manufacturing activity indicators have shown continued sluggish activity in the sector that has been affected by high interest rates. Later this week, the US August jobs report will be released and could lead to further volatility, as last month a hotter-than-expected unemployment reading led to a stock market drawdown.

Notably, according to Investopedia, September is the only calendar month that, over the last 98 years, has recorded negative returns in the stock market, leading to what’s known as the September Effect, which refers to the market’s underperformance during the month.

Featured image via Unsplash.