The total amount of U.S. federal government debt has surpassed $40 trillion, reaching a historic high; this figure includes both publicly held debt and intra-governmental debt, reflecting the cumulative result of years of fiscal deficits.

The debt milestone was reached earlier than previously anticipated by the Congressional Budget Office (CBO). The CBO had originally projected that U.S. public debt would approach $39.4 trillion by the end of the fiscal year, but the actual total crossed the $40 trillion mark in August, indicating that the demand for fiscal financing is growing faster than earlier predictions.

The direct source of the debt increase is the ongoing federal fiscal deficit: government spending has long exceeded tax revenue, with Social Security, Medicare, Medicaid, defense spending, and interest on the national debt contributing to significant expenditure pressure; when refinancing maturing debt, the high interest rate environment also raises the cost of new interest payments.

As old debt is gradually refinanced at higher coupon rates, net interest expenditure has become one of the fastest-growing items in the federal budget. The yield on 30-year U.S. Treasury bonds has risen to 5.33%, the highest level in about 19 years, and the rising long-term financing costs further increase the cost for the Treasury to issue new debt and roll over existing debt.

Reaching $40 trillion does not mean the government will immediately face a payment crisis: U.S. debt is denominated in dollars, and the Treasury can meet nominal payments through tax revenue and continued borrowing; however, the expansion of debt means that more future budget revenue will need to be allocated for interest payments, compressing the flexibility of fiscal policy in times of recession, war, or bailout events.

In market mechanisms, the Treasury is a continuous net supplier of government bonds, while banks, money market funds, pension funds, insurance companies, overseas official institutions, and asset management firms are the main buyers. New supply requires higher yields or greater absorption by the private sector to clear; if overseas demand is insufficient, funds may shift from stocks, credit, and other risk assets to government bonds, causing term premiums to rise and putting pressure on long-duration tech stocks, housing, and highly leveraged companies, while cash flow strong, short-duration assets and companies with pricing power benefit relatively.

Source: Public Information