US Debt Tops $40 Trillion for First Time as Treasury Doubles Buybacks

$10 Trillion Jump in Four Years

Rising Health-Care and Defense Spending Fuels Debt Surge

Higher Interest Costs Worsen the Cycle

Trump Presses Fed to Cut Rates

10-Year Yield Falls 0.54 Percentage Point in a Day

'Fiscal Tightening, Not a Short-Term Fix, Is Urgent'

US national debt has topped $40 trillion for the first time, driven by heavy fiscal spending, tax cuts, and rising Social Security and health-care costs. As the interest burden mounts, President Donald Trump's administration has moved to push Treasury yields lower by expanding buybacks of long-term government bonds.

Debt Now Matches US GDP

The US Treasury said on Aug. 19 that total federal debt stood at $40.047 trillion as of the previous day. Debt held by the public totaled about $32.266 trillion, while intragovernmental holdings were $7.782 trillion.

US national debt first exceeded $30 trillion in January 2022, meaning it took about four and a half years to cross $40 trillion. That compares with the nine years it took to rise from $10 trillion in September 2008 to $20 trillion in September 2017, highlighting the sharper pace of increase.

Large fiscal stimulus, tax cuts, and rising Social Security and medical spending are among the main drivers. Higher defense spending tied to the Middle East war with Iran, which began in late February, also contributed to the increase. The Wall Street Journal said aging has lifted health-care and Social Security spending while tax revenue has not kept up. Congress has repeatedly passed and extended tax-cut measures.

A major risk is that debt held by the public, including holdings by financial firms, foreign governments and central banks, has reached 98% of US gross domestic product. The Congressional Budget Office said that at the current pace, the ratio will rise to 120% in 10 years and 175% in 30 years.

Debt Growth Fuels a Yield Spiral

Rising debt is pushing up long-term Treasury yields, which move inversely to prices. Investors expect supply to increase as the government issues more debt to refinance maturing obligations. Competition for funding with Big Tech companies issuing corporate bonds at yields more than 1 percentage point above long-term Treasuries, together with persistent medium- and long-term inflation concerns, is also driving Treasury yields higher. The 30-year Treasury yield recently climbed to 5.33% as of Aug. 18, the highest in 19 years, while Treasury auction yields reached their highest in 25 years.

The government's interest burden is also growing. US interest costs for fiscal 2026, which runs from October 2025 through September 2026, rose 15% from a year earlier to $1.17 trillion. Interest is now the third-largest item in the federal budget after health care and Social Security.

Bloomberg said rising interest costs could create a "doom loop" that drives debt even higher and prompts investors to demand greater yields. The concern is that surging debt could trigger a vicious cycle of higher yields, rising government interest costs, more refinancing issuance and still higher yields.

Treasury Expands Buybacks

The US Treasury said on Aug. 19 it would double the size of its long-term Treasury buybacks to at least $4 billion per operation from $2 billion. In a buyback, the Treasury purchases bonds trading in the market. Investors viewed the move as a signal that the department wants to contain long-term yields by buying longer-dated debt while raising needed funds through short-term issuance.

Trump added to that pressure, saying on Aug. 19 that he "really" wants lower interest rates as he renewed calls for the Fed to cut rates.

Following the administration's moves, the 30-year Treasury yield fell 0.09 percentage point from a day earlier to 5.19%. The 10-year yield dropped 0.54 percentage point to 4.65%.

Some in the investment-banking industry question the effectiveness of the buybacks. The move may provide short-term relief by reducing long-term supply and easing upward pressure on yields, but it will also lead to more short-term issuance. With maturities shortened, the government would have to sell bonds more frequently and would be more exposed to the risk of rising rates.

Calls are growing for more fundamental steps, including fiscal tightening. Guy Miller, chief strategist at Zurich Insurance, said the expansionary fiscal stance ultimately has to be addressed.

Hwang Jung-soo, New York correspondent / Kim Ju-wan, reporter hjs@hankyung.com