US debt burden puts pressure on the cost of government borrowing
US debt has passed $40 trillion as long-term Treasury yields approach 5.4%, raising questions about the sustainability of Washington’s borrowing.
The United States’ national debt has surpassed $40 trillion, while the yield on 30-year Treasury bonds has risen to nearly 5.4%, its highest level since 2007, according to Deutsche Welle.
The higher yields are increasing the cost of long-term government borrowing as Washington’s budget deficit is projected to approach 6% of gross domestic product this year. Congressional Budget Office calculations cited by Deutsche Welle estimate that the US is already paying more than $1 trillion a year in interest on its debt.
The scale of the increase has accelerated over time. US debt rose from $5.2 trillion in 1996 to $10 trillion during the 2008 financial crisis, reached $20 trillion in 2017 and passed $30 trillion by early 2022. It took about four and a half years to reach the latest milestone.
Reuters, as cited by Deutsche Welle, reported that Norway’s sovereign wealth fund plans to reduce its US government bond holdings by about $80 billion, from roughly $215 billion at the end of June. The supplied material does not independently confirm the reported move.
Treasury Secretary Scott Bessent has announced plans to increase long-term US government bond buybacks from $2 billion to as much as $6 billion. Carsten Roemheld of Fidelity International said the measure would be too small on its own to keep yields under control over the long term.
Investors still have limited alternatives to US government debt. Economists cited by Deutsche Welle said European markets, China and other emerging economies could not readily replace the US market, although borrowing by major technology companies to fund artificial-intelligence infrastructure is creating greater competition for Treasury bonds.
