U.S. debt crisis drives Treasury yields to 15-year high
The bond market has issued a stark warning to the U.S. government as the 10-year Treasury yield climbed to 5.04%, a level not seen since 2007. This surge comes amid the Federal Reserve’s first rate hike since 2023, but analysts highlight a deeper issue: the nation's ballooning debt. The gross national debt recently surpassed $40 trillion, up from $38 trillion in October and $39 trillion in March, indicating the government is borrowing a trillion dollars every five months. With the fiscal year deficit already at $2 trillion, the financial strain is becoming unsustainable.
The rising debt is triggering a budget crisis, as interest payments on the national debt hit $970 billion in fiscal year 2025, surpassing defense spending. This year, interest costs grew by 12%, adding $111 billion more to the federal tab. Projections from the Congressional Budget Office warn that these payments could double to $2.1 trillion by 2036, effectively turning the Treasury into a massive adjustable-rate mortgage. The increasing burden threatens the U.S. dollar’s status as the world’s reserve currency, a privilege that relies on global confidence in America’s financial stability.
Despite these risks, Congress remains gridlocked, failing to pass timely budget legislation. The Congressional Budget Act of 1974 has only been fully executed on time four times in the last 50 years. This year, lawmakers delayed funding decisions until December 11, prioritizing campaigning over fiscal responsibility. Additionally, oversight is weak, with the Pentagon failing eight consecutive audits, unable to account for 61% of its $3.5 trillion in assets. Meanwhile, public debates focus narrowly on discretionary spending, ignoring the larger issues of mandatory spending and debt interest.
The Congressional Budget Office has repeatedly cautioned that rising debt could trigger a sudden loss of investor confidence, leading to a sharp spike in interest rates. Without meaningful action, the U.S. faces a growing threat to its financial stability and economic future.