US national debt breaches $40 trillion as Treasury intervenes in bond markets

The United States gross national debt has surpassed the $40 trillion threshold for the first time, reaching $40.05 trillion at the close of business on Tuesday, 18 August 2026. Data released by the Treasury Department on Wednesday indicates that this figure significantly exceeds the Congressional Budget Office’s earlier forecast of $39.4 trillion for the end of fiscal year 2026. The rapid accumulation of debt has raised concerns among policymakers and market observers regarding the sustainability of current fiscal trajectories.

The surge in borrowing is attributed to a combination of rising interest costs, long-term obligations associated with social security and healthcare, and the economic impact of invalidated tariffs. As the federal government continues to operate at a deficit, borrowing has increased to cover obligations including war spending and tax cuts. Experts note that current deficits are estimated at six to seven percent of GDP, a substantial increase from the three to four percent levels that previously concerned financial markets.

Market volatility accompanied the announcement, with long-term US Treasury bond yields rising to their highest level since 2007 on Tuesday. This spike reflected growing price pressures linked to the war in Iran and anxiety over US deficit spending. In response, the Treasury Department intervened early on Wednesday to stabilise the long-term bond market, a move that successfully sent yields lower.

Jessica Riedl, a budget and tax fellow at the Brookings Institution, described the United States government as being on an "unsustainable path with deficits." She noted that the country has moved into roughly $2 trillion deficits even during periods of peace and prosperity. Riedl emphasised that while there is no specific debt-to-GDP level that automatically triggers a crisis, these symbolic landmarks serve as warnings for financial markets to reassess rising debt.

Caleb Quakenbush, director of fiscal policy at the Bipartisan Policy Center, warned of the uncertainty surrounding the "unprecedented levels of borrowing that we're seeing now." He observed that federal borrowing had previously surged during the Great Recession of 2007-2009 and following the pandemic response, but noted that the trajectory of US budget spending has not been addressed in a "meaningful or durable way" by Congress or US administrations.

Treasury Secretary Scott Bessent has previously set a goal of cutting the US deficit to three percent of GDP. However, analysts suggest that even outside of a crisis scenario, the United States could face higher borrowing costs for consumers and businesses, potentially squeezing the economy. The intervention by the Treasury Department highlights the immediate pressure on the administration to manage market confidence while addressing structural fiscal imbalances.