U.S. Debt Tops $40 Trillion as Treasury Buys Back Bonds

The debt stock has been rising as annual spending outpaces tax receipts by about $2 trillion, while the Trump administration’s tax-cut law is expected to widen deficits over the next decade. The Supreme Court’s ruling in February that the White House’s global tariffs were illegal also removed a revenue source that had been helping offset some of the red ink.

Interest expense is becoming a bigger problem for the federal budget. Washington is now spending more than $1 trillion a year on debt service, making it the second-largest line item after Social Security and putting pressure on future fiscal choices, from defense and healthcare to tax policy.

Markets are also feeling the strain. Treasury yields have stayed elevated, with the 10-year note around 4.95% and the 2-year near 4.56%, keeping borrowing costs high for the government, corporations and households. Long-duration bond funds have been weak as well, with the iShares 20+ Year Treasury Bond ETF closing at 80.87, below both its 50-day and 200-day moving averages, while its RSI has slipped to 40.5, a sign of persistent technical pressure.

The Treasury said it will double its bond buyback operations to at least $4 billion, a move aimed at improving liquidity in longer-dated securities. For investors, that is a signal the market for government debt is becoming harder to absorb, even as deficits keep growing and supply remains heavy.

The broader narrative is straightforward: the U.S. is funding more of its spending with debt, paying more to do it, and relying increasingly on market support to keep the system functioning smoothly. That combination matters for bondholders, equity investors and policymakers alike, because it shapes everything from yield curves and dollar strength to the cost of capital across the economy.

The next catalysts are the path of interest rates, future Treasury refunding plans and any move in Washington toward spending restraint or new revenue. If deficits continue to widen while borrowing costs stay near current levels, the pressure on the fiscal outlook and bond market liquidity is likely to intensify.