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The US national debt now stands at a record $40 trillion (€34.4tn), while the Treasury has responded to the bond market pressure by pledging to buy back far more of its own older securities.
Washington’s two announcements landed on the same day and represent two symptoms of the same underlying strain: a government borrowing at a record pace just as buyers of its longest-dated debt are demanding higher returns to keep lending.
Buybacks work like a targeted repurchase. Rather than printing new money, the US Treasury uses cash it already has to repurchase older, harder-to-trade bonds from investors, improving liquidity without changing the total stock of debt.
From 9 September, the maximum size of each buyback operation in the 10-to-20-year and 20-to-30-year markets will at least double, from $2 billion (€1.7bn) to $4 billion (€3.4bn), running through the next quarterly refunding on 4 November.
The US Treasury said the change reflects “strong sponsorship from market participants” in that part of the curve, but the timing of the decision was no accident.
The 30-year yield had climbed on Tuesday to its highest level since 2007 amid what analysts called a buyers’ strike stretching back to late June, aggravated by a swelling supply of corporate debt tied to AI data centre spending.
Yields duly fell after Wednesday’s announcement, with the 30-year dropping roughly 9 basis points and the 10-year around 6, and Wall Street rallied.
Asked whether Americans should worry about the volatility, US President Donald Trump simply said: “No, I don’t think so.”
However, not everyone is convinced the fix goes deep enough.
The size of the increase is modest next to the $32 trillion (€27.5tn) Treasury market it is meant to steady, and notable economist Mohamed El-Erian suggested the outsized market reaction reflected hopes of broader intervention to come rather than the direct effect of the buybacks themselves.
Thomas Simons, chief US economist at Jefferies, said the announcement broke with Treasury’s usual pattern of steady, well-flagged communication about its borrowing plans and felt “shot from the hip”.
How the US national debt reached $40 trillion
The debt figure, confirmed by US Treasury data covering Tuesday, splits into $32.27 trillion (€27.75tn) held by the public and $7.78 trillion (€6.69tn) owed between government accounts.
It arrived roughly two fiscal years earlier than expected as the US Congressional Budget Office projected in May 2023 that the threshold would not be crossed until 2028, and it came remarkably fast even by recent standards: $39 trillion (€33.5tn) was reached only in March, $38 trillion (€32.6tn) the previous October.
The US government borrowed $1.8 trillion (€1.5tn) in the first ten months of this fiscal year alone, already more than it borrowed in the whole of the last one, as spending on Social Security, Medicare, defence and interest payments continues to outrun revenue.
“The national debt is not just a number on the government’s balance sheet,” said David Young, president of the Conference Board’s CEO Center, noting it shapes the financial decisions Americans make daily.
The two stories feed each other.
A bigger debt load makes investors warier about lending long-term, which pushes yields higher. In turn, higher yields then raise the government’s own interest bill, adding further to the debt the US Treasury has to finance next.
Wednesday’s buyback expansion may ease the immediate pressure, but it does nothing to slow the borrowing driving it.