The US national debt has reached a record $40 trillion, sparking concerns among traders about the state of public finances in the world’s biggest economy. The debt has doubled in less than a decade, with the latest data from the US Treasury showing the staggering debt amount.
Borrowing costs rose again after a White House intervention to inject billions of dollars into the market proved short-lived. The move was an attempt to soothe jittery bond markets, but its effects were temporary.
Yields on US 30-year Treasury bonds soared to a 19-year high of 5.34% on Tuesday, before sliding back to 5.18% after Treasury Secretary Scott Bessent announced a doubling of buybacks of US bonds.
The dollar hit a three-month low, and ructions in US Treasuries have been echoed in global bond markets. Yields on UK 30-year bonds hit 5.86% this week, close to a 28-year high.
Jefferies economist Mohit Kumar suggested that the Trump administration intervened because of the impact Treasury yields could have on mortgage borrowers. Analysts at JPMorgan said borrowing costs would keep rising unless the White House tackled America’s debt.
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Watchdogs in the US have warned that a full-blown debt crisis could erupt unless legislators raise taxes, cut spending, or both. The debt figure has quadrupled in less than 20 years, after taking until 1981 to reach $1 trillion.
Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, said “It is staggering how predictable the fiscal decline of a global power can become.” US debt now stands at around 120% of gross domestic product, with around $1.1 trillion spent servicing debt interest every year.
Susannah Streeter, chief investment strategist at Wealth Club, said Bessent’s intervention “could prove to be a sticking plaster which could be rapidly ripped off”. She added that it does not change the fundamental picture of rising government debt, persistent deficits, and inflationary pressures.
They will likely remain a concern for traders and lawmakers alike as the US national debt continues to grow.
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