The U.S. federal budget deficit reached nearly $2 trillion during the first 11 months of fiscal year 2026, according to data released by the Treasury Department on Sept. 11. The government recorded a $167 billion deficit in August, significantly below the $404 billion consensus estimate and down 61% from July’s $432 billion shortfall.

The August deficit was also 52% lower than the $345 billion gap recorded during the same month last year. Despite the improvement, the fiscal year-to-date deficit reached $1.97 trillion, nearly $200 billion higher than during the comparable 11-month period of fiscal 2025. Tax receipts totaled $360 billion in August, bringing the fiscal-year total to nearly $4.9 trillion.

Federal spending fell to $527 billion last month, with Social Security accounting for the largest share at $141 billion. Net interest payments totaled $86 billion, followed by health care spending at $81 billion and national defense at $72 billion. On a fiscal-year basis, Social Security spending exceeded $1.5 trillion, while interest costs surpassed $1 trillion and overtook Medicare as the government’s second-largest expenditure.

Rising debt-servicing costs are becoming an increasingly important concern as the national debt reached $40.048 trillion on Sept. 10. Treasury Secretary Scott Bessent has attempted to contain longer-term borrowing costs through debt buybacks and greater reliance on short-term Treasury bills. The Treasury launched a $6 billion buyback of 10- and 20-year bonds on Sept. 10, following two $12.5 billion operations earlier in the month, with additional buybacks planned.

Investors, however, remain concerned about the outlook for U.S. government debt. Ten-year and 30-year Treasury yields ended the week at 4.97% and 5.36%, respectively, as persistent inflation, fiscal pressures and expectations for Federal Reserve policy weighed on the bond market. Meanwhile, demand for a recent $22 billion 30-year Treasury auction was weak among primary dealers but strong among indirect bidders, including foreign central banks. President Donald Trump has also pledged a potential $5,000 dividend payment to Americans if Republicans retain control of Congress, adding another potential fiscal consideration for markets.