US National Debt Surpasses $40 Trillion Amid Bond Market Turmoil

The United States national debt officially surpassed $40 trillion on August 18, 2026, reaching $40.05 trillion. This milestone was hit months earlier than forecasted, driven by escalating defense spending for the war in Iran, mandatory Social Security and Medicare costs, and tax cuts enacted under Donald Trump. Annual interest payments now exceed $1 trillion, making debt service the second-largest federal expense after Social Security.

The milestone triggered a massive sell-off in the bond market, pushing 30-year Treasury yields to nearly 20-year highs. In response, Treasury Secretary Scott Bessent implemented emergency liquidity support, doubling the scale of long-term bond buybacks to $4 billion to prevent interest rates from spiking. Despite these interventions, yields remained volatile, contributing to a rise in 30-year fixed-rate mortgages to 6.67%.

Political leaders remain divided on the cause and solution. The Trump administration attributes the fiscal state to a debt bomb inherited from Joe Biden, while Democrats point to Republican tax cuts as the primary driver. Trump and Bessent argue the U.S. can grow its way out of the debt through economic expansion and AI-driven productivity. Conversely, fiscal watchdogs and economists warn of a self-feeding debt spiral, noting that the U.S. is nearing its $41.1 trillion statutory debt limit, which could be reached by early 2027.