US National Debt Reaches $40 Trillion: What DACH Investors Must Expect Now

Key Takeaways

• US national debt exceeded the $40 trillion threshold in mid-August 2026 – the debt burden increased by $10 trillion in less than five years, after standing at $30 trillion in January 2022
• The yield on 10-year US Treasury bonds rose from 3.97% on February 27, 2026 to 4.72% on August 17, while 30-year Treasuries reached 5.31%, the highest level in nearly 20 years
• US Treasury Secretary Scott Bessent announced in the third week of August plans to at least double the planned volume of the bond buyback programme – the eight-week period begins on September 9, 2026
• Approximately 60 cents of every dollar the US currently borrows flows exclusively into interest payments on existing debt – a ratio that intensifies the fiscal challenge
• The US debt-to-GDP ratio stands at around 120%, significantly higher than comparable economies such as India at approximately 83%

The $40 Trillion Threshold: Pace and Scale of Debt Accumulation

On August 19, 2026, US national debt exceeded $40 trillion for the first time. The pace of new borrowing has accelerated: while debt stood at $30 trillion in January 2022, it took less than five years for an additional $10 trillion to accumulate. By comparison, India has a debt-to-GDP ratio of around 83% and absolute debt of less than $3.5 trillion. The US is significantly higher at around 120% of GDP.

Several policy decisions have fueled debt accumulation. President Trump's 2017 tax reform sustainably reduced federal revenues. The COVID-19 pandemic required extensive spending programmes. During Trump's second term, Congress passed the One Big Beautiful Bill Act, which according to projections will increase national debt by a further $4.7 trillion.

Bond Yields at Twenty-Year Highs – Despite Easing Interest Rate Expectations

Yields on US Treasury bonds rose sharply in the first half of 2026. Ten-year US Treasuries yielded 3.97% on February 27; on August 17, the yield stood at 4.72%. The move was even more pronounced for 30-year bonds: from 4.64% at the end of February, the yield climbed to 5.31% in mid-August – the highest level in nearly two decades. At the end of August, yields on government bonds were trading at around 4.69%, also reaching a twenty-year high, according to market reports from August 21.

At first glance, the development appears contradictory: although expectations for further Federal Reserve rate hikes have eased, yields continued to rise. Analysts cite rising oil prices, which worsen the inflation outlook, unclear Fed communication about future monetary policy, rapid debt accumulation, and supply-related price shocks as reasons.

The inverse relationship between bond prices and yields means in concrete terms: when yields rise, prices of existing bonds fall. Newly issued bonds with higher coupons become more attractive, while older securities lose value. DACH investors holding US Treasury bonds in their portfolios had to accept corresponding price losses.

Treasury Department Buyback Programme: Attempt to Dampen Yields

US Treasury Secretary Scott Bessent announced in the third week of August plans to at least double the planned volume of the bond buyback programme. The programme is to run for eight weeks from September 9, 2026 – a period that coincides with the US midterm elections. Bessent stated: "Once the market understands that bonds will continue to fall..."

The buybacks aim to improve trading in less liquid bonds by removing securities from the market that are not regularly traded. The mechanism: if the Treasury Department buys long-term bonds, their demand and thus their price rises. Since bond prices and yields move inversely, yields fall as prices rise. The goal is to lower yields on longer-dated US Treasury bonds.

Teppei Ino, head of Global Markets Research at MUFG Bank in Tokyo, warned in August in this context that it would be "unwise" to assume that Kevin Warsh (Fed leadership) and Treasury Secretary Bessent are acting independently of each other. Market interpretation of their communication could further exacerbate tensions in bond and foreign exchange markets.

Fiscal Burden: 60 Cents per Dollar for Interest Payments

The combination of rising interest rates and growing debt burden is dramatically worsening the US fiscal position. According to analyses from August 21, 2026, approximately 60 cents of every dollar the US currently borrows flows exclusively into interest payments on existing debt. This ratio is described as the "most critical feature" of the fiscal challenge.

For taxpayers, this could have medium-term consequences: higher deficits could lead to tax increases without additional government services being provided – additional revenues would merely service interest costs. Rising bond yields also affect the broader economy: higher interest rates burden economic growth, increase borrowing costs for companies, and pressure equity valuations. Existing bondholders suffer price losses when yields rise.

Impact on DACH Investors: Volatility and Portfolio Effects

The evolution of US national debt has increased tensions in global financial markets in the months leading up to the crossing of the $40 trillion mark. According to reports from August 26, US management of its debt sent "shockwaves through international markets" in recent weeks.

For investors in the German-speaking region, several implications arise: first, rising US yields influence global bond markets – European bonds also come under pressure when US Treasuries become more attractive. Second, higher US interest rates tend to strengthen the dollar, which affects currency risks in international portfolios. Third, fiscal uncertainties and the announced bond market interventions could increase volatility.

The announced buyback programme represents an unusual step: typically central banks – not finance ministries – intervene in bond markets. The timing close to the midterm elections and coordination between the Fed and Treasury raise questions about monetary policy independence. DACH investors holding US Treasury bonds, dollar positions, or US equities should closely monitor communications from both institutions in the coming weeks.

As of August 28, 2026, the DAX stands at 26,553.5 points (+0.66%), the Euro Stoxx 50 at 6,480.5 points (+0.73%). US markets are weaker: the S&P 500 fell to 7,713.38 points (-0.20%), the NASDAQ Composite to 26,130.2 points (-0.08%). The diverging movements reflect different perceptions of fiscal and monetary policy risks on both sides of the Atlantic.

Outlook: Persistent Uncertainty

The interplay of rising debt, high bond yields, and unconventional policy responses creates an environment of elevated uncertainty. Market participants are closely monitoring communications from the Federal Reserve and the Treasury Department to glean signals about future monetary and fiscal policy direction. For DACH investors, this means: portfolios with US exposure require special attention in the coming months. The US's structural fiscal challenges cannot be resolved in the short term – the buyback programme can at best provide temporary relief.