US National Debt Surpasses $40 Trillion Amid Bond Market Intervention

The US national debt has surpassed $40 trillion and now represents 125% of the country's GDP, according to Bloomberg. The rising interest costs on this debt are a major concern, with Social Security and Medicare being among the main drivers.

Last week, the US Treasury Department announced it would accelerate its purchases of long-term government debt in an effort to bring down steadily rising yields on these bonds. This intervention has caused significant unrest in the markets, with many warning about unpredictable policy surrounding US government debt.

The buyback plans are meant to increase liquidity in the bond market and push yields lower, which would reduce interest costs. However, this is financed with short-term debt instruments, such as T-bills with maturities of up to 1 year, on which yields are generally lower.

Notably, gold surged on Wednesday after news of the buyback plans became known, while silver rose 6.8% this week, reaching a two-month high. The debasement trade appears to be resuming, with investors buying assets such as gold and precious metals out of fear of inflation or rising government debt that may become unsustainable.