US debt interest could reach 4% of GDP as bond markets discipline borrowers

US debt interest costs could climb to 4% of gross domestic product by the end of the 2020s, strengthening bond investors’ bargaining power and the market discipline imposed on borrowers amid a global borrowing surge. The rising burden could force the next US president into an unusual policy decision, such as raising taxes or adjusting spending. Competition for capital is also likely to give bond investors greater influence over financing terms. In an Oct. 18 Bloomberg interview, Tony Crescenzi, PIMCO market strategist and portfolio manager, said US net interest costs had reached 3.2% of GDP and could rise to 4% by the end of the decade.

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