US national debt tops $40 trillion as bond yields hit 2007 highs

Crossing the threshold

The United States Treasury Department reported on 19 August 2026 that total public debt outstanding reached $40.047 trillion at the close of business on Tuesday. The official balance of $40,047,425,768,420.22 includes $32.266 trillion in securities held by the public and $7.782 trillion in intra-governmental holdings. This milestone arrived five months after the debt passed $39 trillion, outpacing the Congressional Budget Office projection of $39.4 trillion by the end of fiscal year 2026. The total debt has more than doubled in less than a decade, climbing from $19.95 trillion when Donald Trump took office in January 2017. Roughly one-third of that ten-year expansion occurred during two years of federal borrowing for COVID-19 pandemic response measures under Trump and former President Joe Biden.

Revenue shortfalls and budget pressures

Federal expenditure currently exceeds annual tax revenue by approximately $2 trillion, pushing annual deficits to between 6% and 7% of gross domestic product. The gap widened after the Supreme Court invalidated federal import tariffs in February 2026, requiring the government to refund customs duties to businesses. Additional fiscal pressure stems from tax cuts enacted in 2025, higher spending on social security and healthcare programs, and military expenditures connected to the war in Iran. Annual net interest payments on the accumulated debt now exceed $1 trillion, making debt servicing the second-largest line item in the federal budget behind Social Security. The federal debt now stands at nearly 125% of the country's gross domestic product.

Speaking on the widening imbalance, Jessica Riedl of the Brookings Institution pointed to the persistence of elevated deficits:

Over the last few years, the United States has moved into roughly $2 trillion deficits, even during peace and prosperity.

Bond market reaction and Treasury buybacks

The rapid expansion of federal issuance prompted heavy selling in government bond markets during the week. Yields on 30-year Treasury bonds reached their highest level since 2007, following a $25 billion auction of 30-year debt that cleared at the highest yield since 2021. To calm the market and support liquidity, Treasury Secretary Scott Bessent announced on Wednesday that the Treasury would double the size of its buyback operations for debt maturities between 10 and 30 years to at least $4 billion per operation starting in September. The announcement pushed long-term yields back down later in the day.

Margaret Spellings, head of the Bipartisan Policy Center, warned of the broader economic consequences of unaddressed fiscal trajectories:

Our federal programs spend much more than the government takes in, and the biggest-ticket items in the federal budget are all running on autopilot.

Debt limit countdown

The current rate of borrowing brings the United States closer to its statutory debt ceiling of $41.1 trillion. Treasury projections indicate that borrowing will reach this legal limit early next year. Congress will need to raise or suspend the cap before that deadline to prevent a payment default by the federal government. The target set earlier by Bessent to lower the annual deficit to 3% of gross domestic product remains constrained by statutory spending commitments and scheduled debt servicing.