JUL · ISSUE 30 · July 14, 2026
MACRO · DEBTThe US now pays more in interest than in defense
The 30-year bond has closed above 5% for three straight days. The bill for that just overtook the Pentagon.
INTEREST, 12 MONTHS
$1.35T
trillion, with a T
30-YEAR BOND
5.11%
3rd day above 5%
10-YEAR BOND
4.56%
the mortgage benchmark
THE NUMBER
$1.35T
the annual cost of interest alone
This is not what the US owes. It is what the US pays every year purely for the privilege of owing it. That line has now passed the defense budget, and it grows on its own every time the long bond ticks up.
THE DATA
ZOOM IN$1.35 trillion
$1.35T
▲ now above the defense budget
Every tenth of a point the long bond climbs adds billions to this bill. And nobody votes on it. It pays itself.
That is the trailing 12-month interest cost on US federal debt. It no longer fits in the 'accounting detail' box.
- TRILLION
- — A thousand billion. The scale at which government debt is measured.
- BASIS POINT
- — 0.01%. A hundred basis points make 1%.
QUOTE
AUTHORITYThe bond market doesn't vote, it invoices
“The bond market has no political opinions. It has a spreadsheet, and when the spreadsheet doesn't balance, it raises the price of money until it does.”
Stocks trade on sentiment. Bonds are cold: they run the numbers, and numbers don't change their mood.
- BOND MARKET
- — Where governments borrow. Bigger than the stock market.
- PRICE OF MONEY
- — The interest rate. What it costs to borrow.
- SERVICING
- — Paying the interest on debt, separate from repaying the principal.
THE PATH
2 MONTHS5% stopped being a ceiling and became a floor
June was the breather. July took it back up, and this time with oil climbing behind it.
The 30-year crossed 5% in May, got a breather in June, and is back above it. Three sessions running.
- THRESHOLD
- — A psychological level the market watches. Crossing it changes the story.
- MA200
- — The 200-day moving average. It marks the underlying trend.
SIDE BY SIDE
TWO BILLSInterest vs defense: which one wins
INTEREST ON THE DEBT
The line nobody votes on
- $1.35 trillion over the trailing 12 months.
- Not debated in Congress. It is a contract: you pay, or you default.
- It grows by itself every time the long bond rises. No new spending required.
- The more debt matures, the more gets refinanced at today's higher rate.
THE DEFENSE BUDGET
The line they do vote on
- Historically the largest single item of US discretionary spending.
- Negotiated, trimmed and expanded in Congress every single year.
- It now sits below what the country pays in interest.
- It is the yardstick the market uses to grasp the scale.
Once interest payments outrun the world's largest military, fiscal policy stops being a choice and becomes an obligation.
- DISCRETIONARY
- — Spending Congress sets each year. It can be cut.
- DEFAULT
- — Failing to pay debt when it comes due. For a state, catastrophic.
EXAMPLE
SAMPLE MIXHow a portfolio sits when the long end pays 5%
Mature soon · pay around 4.5%
Steady earnings, low debt
Pay 5.11% · high duration
Liquid, no price risk
When the risk-free asset pays 5%, everything else has to justify why the risk is worth taking at all.
This is NOT a recommendation. It is an illustrative example of how the split shifts when the risk-free bond pays 5%.
- DURATION
- — How sensitive a bond's price is to rates. Longer maturity, bigger hit.
- RISK-FREE ASSET
- — Government debt. The bar every other investment must clear.
CALENDAR
THIS WEEKFive events pushing on the 30-year
| TUE JUL 14 · 08:30 ET | JUNE CPI | High | The referee. Core above 0.25% and the long bond breaks higher. |
| TUE JUL 14 · 10:00 ET | WARSH BEFORE THE HOUSE | High | Semiannual testimony. The market is listening for tone, not numbers. |
| TUE JUL 14 · PRE-OPEN | BIG BANK EARNINGS | Medium | The banks open the season. High rates help them, defaults don't. |
| THU JUL 16 · EARNINGS | TSMC | High | The real read on the semiconductor cycle. It drags the whole sector. |
| FRI JUL 17 · CLOSE | MONTHLY OPEX | Medium | Options expiry. It releases the magnet pinning the index to its range. |
With the 30Y already at 5.11%, these five events decide whether it runs to 5.20% or drops back under 5%.
- CPI
- — Consumer Price Index. The official inflation reading.
- OPEX
- — Monthly options expiry. It tends to move markets on the third Friday.
- CORE
- — Inflation excluding food and energy. The one the Fed watches.
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- 30Y
- — The 30-year US Treasury bond.
- YIELD
- — A bond's annual return. It rises when its price falls.