U.S. Federal Debt Tops $40T; CEO Warns of Market Strain

U.S. federal debt stood at about $40.03 trillion on Aug. 20, Treasury data show. Nigel Green, chief executive of Devere Group, warned on Aug. 24 that rising interest costs and the need to refinance older, low-rate bonds at higher yields could create a feedback loop that places pressure on global markets.

Treasury figures show roughly $32.28 trillion of the total is debt held by the public and about $7.75 trillion is intragovernmental holdings. On Aug. 20 the Congressional Budget Office raised its fiscal 2026 deficit estimate to $2.1 trillion, $200 billion above its February projection after lowering revenue forecasts because of weaker tariff collections. The CBO also said trade policy changes through July 31 add about $900 billion to projected deficits across 2027–2036.

In a June report, the U.S. Government Accountability Office projected debt held by the public could reach 123% of gross domestic product in 2036 and 251% by 2056 under current revenue and spending policies. The CBO’s February baseline had debt held by the public rising from about 101% of GDP this year to 120% by 2036 and an annual deficit of $3.1 trillion by then; the agency has not restated that baseline after its August update.

Green described the mechanism linking those figures to market pressure: as older, cheaper bonds mature the government must issue new debt at prevailing, higher yields, increasing interest expenses and requiring additional borrowing. “This is arithmetic, not sentiment. Interest is compounding faster than the economy generating the revenue to pay it, so every dollar borrowed to cover last year’s interest bill creates a larger interest bill this year,” Green said on Aug. 24.

Higher benchmark Treasury yields influence consumer and corporate borrowing costs. Freddie Mac reported the average 30-year fixed mortgage rate at 6.65% as of Aug. 20, compared with a record low of 2.65% in January 2021. Mortgage rates and Treasury yields do not move point for point, but both react to inflation expectations, central bank policy and investor demand for long-term debt.

Foreign investors hold substantial amounts of U.S. securities and remain exposed to changes in U.S. yields. Treasury International Capital data for June showed foreign residents made $207.1 billion in net purchases of long-term U.S. securities. The Treasury cautioned custodial arrangements can obscure the ultimate country ownership reflected in those figures.

To support liquidity in longer-dated debt, the Treasury Department increased certain buyback operations for 10- to 30-year securities from $2 billion to at least $4 billion per operation, effective Sept. 9 through Nov. 4. The department stated the purchases aim to support liquidity and ease near-term yield pressure; they do not cancel debt or constitute Federal Reserve-style quantitative easing.

Analysts note that higher long-term Treasury yields raise discount rates used to value future corporate earnings, which can lower equity valuations for firms with earnings further out and increase borrowing costs as companies compete with government debt for investor capital. Green warned that portfolios constructed for an environment of low, stable yields may not reflect current interest-rate risks.

Some investors are adjusting allocations in response to fiscal and currency concerns. Bridgewater Associates founder Ray Dalio has projected U.S. debt could reach $55 trillion to $60 trillion in a decade and has expressed a preference for gold and a limited allocation to bitcoin while reducing exposure to debt instruments. Bitcoin’s fixed supply of 21 million coins is cited by supporters as a scarcity feature, but its price has shown volatility during past inflation episodes.

The CBO and GAO projections show expected growth in borrowing and interest costs under current policies, figures that will inform fiscal planning, debt issuance decisions and monetary and budget discussions going forward.