The U.S. government’s debt has crossed the $40 trillion mark for the first time, and for bond ETF investors, the bigger concern may be what comes next: whether swelling Treasury issuance keeps pressure on long-term yields even if the Federal Reserve eventually cuts interest rates.
Treasury data showed total U.S. public debt at $40.047 trillion on Tuesday, including $32.266 trillion held by the public and $7.782 trillion in intragovernmental holdings, according to Reuters. The debt load has more than doubled from $19.95 trillion when President Donald Trump took office for his first term in January 2017.
The milestone comes as the Treasury market is already flashing warning signs. The 30-year Treasury yield climbed to 5.337% on Tuesday, its highest level since 2007, as investors demanded greater compensation for holding long-term government debt amid concerns over inflation, fiscal deficits and the sheer amount of borrowing ahead.
Long-Duration ETFs Are Feeling the Pressure
That environment is particularly challenging for long-duration Treasury ETFs such as the iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT).
