$40 Trillion Debt Milestone Sparks Concerns About Global Markets

The US has crossed the $40 trillion debt mark, with its total debt now standing at about 120% of its GDP. This milestone was reached in less than five years, following a surge in spending during the COVID-19 pandemic and the passage of the One Big Beautiful Bill Act in President Donald Trump's second term.

The US Treasury Secretary Scott Bessent has announced plans to buy back at least double the number of bonds it had already committed to buying. This move aims to cool yields on long-term US government bonds, which have been a major issue for the US government. High bond yields mean interest rates in the economy stay elevated, weighing on economic activity.

The bond yields have risen despite receding expectations of an interest rate hike by the US Federal Reserve. Experts attribute this rise to various factors, including elevated oil prices, lack of clarity over the Fed's future moves, rising debt, supply shocks, and the AI boom's funding requirement rivalling the government's financing needs.