U.S. debt nears $40 trillion, BofA sees $50 trillion by 2029

The U.S. national debt is set to breach $40 trillion within days, with Bank of America projecting $50 trillion by 2029 — pushing its chief equity strategist to favor stocks over bonds.

"Anything But Bonds," Michael Hartnett, chief equity strategist at Bank of America, said, summarizing a market perception that fixed-income investments are losing bets as the government's borrowing needs expand.

The debt has climbed by nearly $3 trillion over the past 12 months, outpacing the roughly $2 trillion annual budget deficit, according to Main Street Economics, a nonprofit economic education group. At $39.93 trillion, the debt stands at 125 percent of GDP — a level not seen since the aftermath of World War II, when it exceeded 100 percent before falling below 50 percent through decades of fiscal restraint.

The fiscal trajectory is deteriorating. The Congressional Budget Office projects multi-trillion-dollar annual additions under current policy, with the debt reaching nearly $70 trillion within a decade. Meanwhile, $86 trillion in unfunded Social Security and Medicare obligations compounds the pressure, and rising interest costs on new long-duration issuance at 5.22 percent create a self-reinforcing cycle that economists warn could become a "doom loop."

30-Year Treasury at 5.22 Percent Signals Investor Demands

Thursday's $25 billion auction of 30-year U.S. Treasury bonds drew a yield of 5.22 percent — the highest since the 5.52 percent recorded in August 2001, according to the Financial Times. The 10-year yield advanced to 4.66 percent. Long-duration investors are demanding significantly higher compensation to hold U.S. government debt, a direct consequence of the fiscal expansion. The last time the 30-year yield exceeded 5 percent was in the early 2000s, before two decades of post-financial-crisis quantitative easing compressed long-duration yields to historic lows.

Les Rubin, founder and president of Main Street Economics, said the approaching threshold should serve as a wake-up call to policymakers who have become numb to the scale of borrowing.

"Forty trillion dollars should be a number that stops everyone in Washington in their tracks," Rubin said. "Instead, it is becoming just another number. We have reached the point where trillion-dollar increases in the national debt barely generate a reaction. That is fiscal denial not fiscal policy."

Peter Schiff, the economist and gold advocate, warned on X that the debt could reach $40 trillion by month-end "if not sooner," predicting the Federal Reserve will "crank up the printing press to buy Treasuries, sending consumer prices soaring."

Fiscal Pressure Reshapes Asset Allocation

The debt milestone is reshaping how investors allocate capital. With 30-year yields at 24-year highs, the risk-free rate against which all assets are measured has risen sharply. Hartnett's "Anything But Bonds" stance reflects a view that equities may outperform fixed income in a high-debt environment, even as the fiscal backdrop creates broader macro headwinds.

The widening gap between government borrowing and its ability to control spending demonstrates that the problem is structural rather than temporary, Rubin said. "We are adding debt at an extraordinary rate, and there is still no plan to reverse the trajectory. This will not end well when tomorrow's bill arrives."

The debt trajectory also constrains the Federal Reserve's policy options. With interest payments on the national debt consuming a growing share of federal revenue, the Fed faces a bind: raising rates to fight inflation would sharply increase borrowing costs, while cutting rates to support growth could accelerate inflation. Schiff has argued this dilemma pushes the Fed toward inflation as a way to ease the government's debt burden.

Former U.S. Ambassador Nikki Haley has also criticized Washington for ignoring the rising debt, describing it as one of the biggest financial threats facing younger Americans. "We're leaving an entire generation broke," she said.

The fiscal backdrop has also become a reference point for alternative assets. When Bitcoin was created in 2009, U.S. national debt stood at approximately $11.9 trillion — a 236 percent increase over the past 17 years. The combination of peak debt and peak borrowing costs is precisely the long-duration solvency concern that Bitcoin's fixed supply and no-counterparty-risk architecture is designed to address, though whether institutional capital interprets the fiscal pressure as a buying signal or a general risk-off environment remains an open question.

The next milestone is already in view. If the current trajectory holds, the $50 trillion mark arrives in July 2029 — less than three years after the $40 trillion threshold. Each additional $10 trillion is arriving faster than the last, and the interest cost of servicing that debt grows with every auction.

This article is for informational purposes only and does not constitute investment advice.