US National Debt Hits $40 Trillion as Interest Costs Surge and Treasury Steps In to Curb Yields

The U.S. national debt crossed $40 trillion on Wednesday, a record milestone that underscores the accelerating pace of federal borrowing and the mounting pressure on bond markets, the Treasury said.

According to Zero Hedge, it took the United States 200 years to reach its first $1 trillion in debt — and just 95 days to add the most recent $1 trillion. The total public debt jumped by over $60 billion in one day and has surged by $1 trillion in just over three months, with a third of the total added in less than five years. The debt stood at $30 trillion as recently as January 2022.

The milestone was announced just hours after Treasury Secretary Scott Bessent unexpectedly unveiled a new measure to lower long-term borrowing costs. The Treasury said it is ramping up liquidity support buyback operations for longer-dated nominal coupon securities, specifically the 10-to-20-year and 20-to-30-year sectors, effectively doubling the size of those operations. The announcement sent yields plunging, according to Zero Hedge.

Driving the debt growth are defense outlays, social programs including Social Security and Medicare, and increasingly the cost of interest itself, the Associated Press reported. The Treasury’s interest costs for the first ten months of fiscal 2026 total $1.37 trillion, a 20% increase from the same period a year earlier, per Zero Hedge. The department paid out approximately $85 billion to bondholders in its semi-annual coupon payment on Monday, the largest on record.

Interest costs are now the third-largest item in the federal budget, surpassing healthcare and trailing only Social Security, which stands at $1.6 trillion. Zero Hedge projects gross interest will exceed Social Security by 2026.

The growing debt service burden has fed a cycle in which investors demand higher yields, raising borrowing costs further, a pattern Zero Hedge described as a “doom loop.” That dynamic was already visible in recent auctions: a 30-year bond sale last week was the costliest in a quarter century, and a 10-year auction drew the highest yield at that tenor since 2007.

“Optically, I’m sure crossing thresholds like $40 trillion will focus attention on the issue in the near term,” said Matthew Luzzetti, chief U.S. economist at Deutsche Bank AG, as reported by Zero Hedge. “But it does not represent a magical threshold for debt dynamics, and projections have anticipated this outcome for some time.” The more pressing concern, Luzzetti added, is the climb in Treasury yields, which is steadily increasing the cost of servicing the debt.

Douglas Holtz-Eakin, president of the American Action Forum and a former director of the Congressional Budget Office, wrote in a note Monday that “the federal budget is the enemy within,” calling it “the greatest threat to the foundations of economic progress, U.S. international economic standing, and national security.” He said the only reason for optimism would be “material actions to rein in the sea of red ink” and that “there are no such material actions.” Zero Hedge reported his remarks.

Both political parties have shown little appetite for the cuts to retirement and health benefits or the tax increases needed to close the deficit. Economists, the CBO, and Wall Street all see little to no improvement in the deficit-to-GDP ratio in coming years, according to Zero Hedge. Many observers anticipate that action will come only after a financial-market disruption forces Congress and the administration to act.

Bessent has said tackling the deficit was a key reason he entered politics, but Zero Hedge reported that he has so far failed to make progress and has adopted the kind of activist issuance tactics he criticized in his predecessor, Janet Yellen.

The debt trajectory assumes no major economic downturn or crisis. Zero Hedge noted that U.S. debt exploded higher during the global financial crisis and the pandemic, and further shocks would accelerate the current trend.