09.01.2026 - $40 Trillion Debt Milestone

$40 Trillion Debt Milestone

A lot has been made in the press about the U.S. public debt reaching a “record-breaking” $40 trillion. A more accurate statement would be “On August 18, 2026, total public debt outstanding in the U.S. reached $40,047,425,768,420.22, surpassing $40 trillion for the first time ever.” It has since eased off, falling to $40,032,876,505,819.31 as of the most recent date published (August 21). However, despite the occasional cashflow-based downward moves, the public debt has been breaking records more days than not for years (hitting statutory debt limits notwithstanding). 

There are 37 scheduled Treasury auctions over the 21 business days in September. The Treasury announced it would buy back some illiquid longer-term Notes and Bonds to attempt to keep a lid on long-term yields. Those buybacks are going to be financed mostly through short-term Treasury Bill auctions, which pay a lower interest rate but still suck up market liquidity. This is a band-aid at best for long-term yields. Inflation fear and total Treasury debt issuance are the real drivers. Important note: this is NOT the same as Fed quantitative easing, which we are unlikely to see in Chair Warsh’s regime, barring a major crisis situation. However, the Fed may start to bump into that pesky third mandate: moderate long-term interest rates. “Moderate” is, of course, in the eye of the beholder.