US Debt Tops $40 Trillion, Squeezing Global Asset Markets

Heavy Treasury issuance fuels widening fiscal deficit

Stocks, real estate and gold all jolt higher and lower

Global asset markets are being rattled after US government debt topped $40 trillion for the first time.

US national debt stood at $40.0332 trillion as of Aug. 20, according to the Treasury Department on Aug. 23. With the fiscal 2026 budget deficit widening to $2.1 trillion, or 6% of gross domestic product, the surge in Treasury supply pushed the 30-year Treasury yield to 5.28%, the highest level in 19 years. The fallout helped drive the S&P 500 down 1.4% last week and the Nasdaq Composite down 2.1%.

Higher Treasury yields are reverberating beyond US stocks and across asset markets worldwide. Bond prices in other countries have fallen as investors shun debt viewed as less safe than Treasuries. With stocks and bonds dropping together, it has also become harder to hedge equity risk with fixed income.

Equities are facing a double blow from a higher discount rate and rising funding costs. As bond yields climb, the present value of future cash flows falls, adding pressure to stock prices. Higher corporate borrowing costs are also raising concern that the long-term AI profit narrative built on capital spending could weaken, as big tech companies compete with the Treasury for investor money. That rate shock is also behind the Kospi's nearly 6% drop in recent sessions and the market's struggle to sustain a rebound. "Moves in US Treasury yields, especially long-dated ones, have become the key variable for global financial markets," Park Sang-hyun, an analyst at iM Securities, said.

Jin-gyu Kang, Hankyung.com reporter josep@hankyung.com