America's debt is getting more expensive

Governments around the world are entering a new era of higher borrowing costs already deeply indebted. More revenue will go toward interest payments as old debt gets refinanced at today's higher rates.

• America is already watching that dynamic play out: Annualized interest costs have reached $1.2 trillion, exceeding defense spending.

What they're saying: "The government consistently rolls over portions of its debt at market prices, so the effective interest it pays on its entire debt stock slowly rises in a high-rate environment," economic researchers at Charles Schwab wrote Tuesday morning in a note titled "America's New Debt Reality."

• The risk is a vicious cycle: Bigger interest bills add to deficits and borrowing needs, putting even more bonds into a market already awash in debt.

Zoom in: Debt held by the public is currently about 101% of GDP, according to the Congressional Budget Office. The nonpartisan agency projects that will rise to 120% in 10 years.

• The situation unfolds in relatively good economic times. A recession would mean weaker revenues and likely more spending to support the economy, requiring Washington to borrow even more.

What to watch: Last week, the government paid the highest auction yields on 10-year notes since 2007 and 30-year bonds since 2001.