U.S. public debt has surpassed $40 trillion, intensifying concerns regarding interest costs and long-term borrowing pressure. Devere Group CEO Nigel Green warned that the resulting feedback loop could impact bonds, equities, currencies, and household financing worldwide.
According to official Treasury figures, total public debt outstanding stood at approximately $40.03 trillion on August 20. Of that total, roughly $32.28 trillion was held by the public, while about $7.75 trillion represented intragovernmental holdings. Green noted that federal interest costs could increase financial-market pressure independently of an economic downturn, as older, lower-cost debt matures and is refinanced at higher rates.
CBO Revisions and Long-Term Projections
The Congressional Budget Office (CBO) raised its fiscal 2026 deficit estimate to $2.1 trillion, representing a $200 billion increase over its February projection, following a reduction in revenue estimates due to weaker tariff collections. Additionally, trade policy changes through July 31 are projected to add $0.9 trillion to deficits across 2027 through 2036.
The CBO's February baseline projected that debt held by the public would rise from 101% of gross domestic product to 120% by 2036. Meanwhile, a June 11 report from the U.S. Government Accountability Office (GAO) projected that publicly held debt will reach 123% of GDP in 2036 and 251% by 2056 under existing policies.
Impact on Yields and Households
Higher benchmark yields also affect households through mortgages and long-term credit. Freddie Mac data showed the average 30-year fixed mortgage rate at 6.65% as of August 20, compared with a record low of 2.65% in January 2021.
International investors remain exposed to U.S. yield shifts through extensive holdings of Treasury securities and dollar assets. Treasury International Capital data released August 17 indicated that foreign residents made $207.1 billion in net purchases of long-term U.S. securities in June. To address liquidity and yield pressure in longer-dated government securities, the Treasury increased certain buyback operations for 10- to 30-year debt from $2 billion to at least $4 billion per operation, effective September 9 through November 4.
Broader Market Reactions
The $40 trillion debt milestone has heightened concerns that higher refinancing costs will expand interest expenses and require further Treasury issuance, which must compete with corporate debt for investor capital. Elevated discount rates can also reduce the present value assigned to companies with distant expected earnings.
Some investors are responding to fiscal and currency concerns by examining scarce assets. Bridgewater Associates founder Ray Dalio warned that U.S. debt could reach between $55 trillion and $60 trillion within a decade, expressing favor for gold and a smaller bitcoin allocation while advising reduced exposure to debt assets. Observers note that while bitcoin's fixed supply of 21 million coins supports arguments regarding currency debasement, its short-term volatility and mixed performance during inflation shocks leave it better suited as a long-term scarcity hedge than a reliable short-term safe haven.
