Treasury Doubles Bond Buybacks as Debt Tops $40 Trillion — Markets Steady After Volatile Week

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The U.S. gross national debt surpassed $40 trillion for the first time in history on Wednesday — just five months after hitting $39 trillion in March. The milestone triggered a sharp selloff in long-term bonds, sending the 30-year Treasury yield to a 19-year high of 5.34%.

In response, Treasury Secretary Scott Bessent announced the department would at least double the size of its liquidity buyback operations for 10- to 30-year bonds, raising the minimum purchase per operation from $2 billion to $4 billion. The move helped stabilize markets, with the 30-year yield falling to 5.18% and the 10-year yield cooling to 4.64%.

President Trump downplayed concerns, telling reporters Americans should not worry about bond market volatility.

The $40 Trillion Milestone: What It Means

The national debt has now more than doubled in less than a decade — from roughly $19 trillion in 2016 to over $40 trillion today. It took 192 years to reach the first $1 trillion, but only five months to go from $39 trillion to $40 trillion.

The breakdown:

Debt held by the public: $32.266 trillion
Intragovernmental holdings: $7.782 trillion
Total public debt outstanding: $40.047 trillion as of August 18

The drivers:

Persistent budget deficits — the federal government recorded a $1.367 trillion deficit in the first nine months of fiscal year 2026
Net interest payments totaled $827 billion — exceeding defense spending of $713 billion
Spending on Social Security, Medicare, and defense continues to outpace revenue

What leaders are saying:

“Forty trillion dollars of debt doesn’t exist solely on the government’s ledgers; it is felt throughout the economy and finds its way to the pocketbooks of people one way or another.”
— Maya MacGuineas, president of the Committee for a Responsible Federal Budget

“Our current fiscal trajectory is plainly unsustainable. Even in the rosiest scenarios, we’re speeding toward a cliff and refusing to turn the wheel.”
— Margaret Spellings, president and CEO of the Bipartisan Policy Center

Treasury’s Response: Doubling Bond Buybacks

On Wednesday, the Treasury announced it would increase buyback operation sizes for long-dated bonds to at least $4 billion per operation. The increase applies to the 10- to 20-year sector and the 20- to 30-year sector and will be effective from September 9 through November 4.

The context: Yields had risen sharply amid concerns over the U.S.-Iran war, the $40 trillion debt milestone, and fears that the Federal Reserve may need to raise rates further if inflation doesn’t cool.

The impact: The announcement drove the 30-year yield down 10 basis points from its 19-year high of 5.34%. The 10-year yield cooled to 4.64%, down from 4.73% earlier in the week.

Market skepticism: Some analysts questioned whether the move addresses the underlying problem.

“It does not change deficits, obviously, and if you are going to buy back the long end, you still will need to issue,” said Dan Gottlander of Citi.

“Tactics and optics only work briefly if there’s no corresponding change to strategy, goals or underlying fundamentals, and the problem festers.”
— Mike Dolan, Reuters columnist

Market Reaction: Stocks Steady, Yields Cool

The S&P 500 rose 0.21% to 7,707.98, snapping a three-session losing streak. The Dow added 0.22% to 53,463.05, while the Nasdaq gained 0.16%.

Home improvement retailers benefited from the retreat in borrowing costs, with Lowe’s and Home Depot each gaining around 2%. The VIX “fear index” fell 6% to 14.89.

The dollar saw its biggest single-day drop in over three months, slipping below 99. Gold crossed $4,500 an ounce on Wednesday.

However: Gains were pared after the Federal Reserve’s July minutes showed “many” participants said rate hikes would be necessary if inflation does not cool down.

What This Means for Urban Communities and the Middle Class

The $40 trillion debt milestone and rising Treasury yields have direct consequences for everyday Americans.

Higher borrowing costs: When the government borrows heavily, it pushes up bond yields, which drive up interest rates on mortgages, auto loans, and credit cards. Mortgage rates are expected to average 6.4% through the rest of 2026.

Higher cost of living: As Margaret Spellings put it: “Federal debt is already raising the cost of living and choking out other spending and investment, threatening our economy and Americans’ long-term prosperity”.

Impact on homebuyers: A report found that the debt burden could cost homebuyers over $100,000 in extra interest by 2036. In a scenario where the government cuts borrowing and interest is lower, this figure drops by $53,000 for buyers in 2031.

Impact on retirees: The debt burden could cost retirees up to $700 a month.

Small business strain: An American taking out a small business loan of $100,000 in 2031 would ultimately owe $611,950.

The Bottom Line

The U.S. national debt has crossed $40 trillion — a staggering milestone that reflects decades of fiscal mismanagement. The Treasury’s decision to double bond buybacks provided temporary relief to markets, but experts warn it does not address the underlying deficit problem.

For working families, the consequences are already being felt: higher mortgage rates, more expensive auto loans, rising credit card costs, and a higher cost of living.

As Maya MacGuineas warned: “Forty trillion dollars of debt doesn’t exist solely on the government’s ledgers; it is felt throughout the economy and finds its way to the pocketbooks of people one way or another”.

With the midterms less than 80 days away, the economy remains the number one issue on voters’ minds.