$40tn debt, $1.8tn deficit: Why US fiscal strain is worrying global markets
US fiscal health is under scrutiny as public debt exceeds $40 trillion and deficits reach record highs. Financial analysts warn that these trends could drive up Treasury yields and create volatility in global equity markets.
Why it matters
Rising US debt and interest rates have significant implications for global financial stability and the cost of borrowing worldwide.
US fiscal deterioration is emerging as a growing risk for global markets, with rising Treasury yields potentially putting pressure on equities and limiting the Federal Reserve's room for manoeuvre, brokerage firm Jefferies said in its latest research report.The brokerage said US public debt has crossed $40 trillion, while the fiscal deficit continues to widen, creating conditions in which long-term borrowing costs could remain elevated.The US fiscal deficit rose to $432 billion in July, the highest monthly deficit since March 2021 and a record for the month.In the first 10 months of the fiscal year, the deficit reached $1.799 trillion, already exceeding the $1.775 trillion deficit recorded for the whole of FY25.Also read: US debt tops $40 trillion - $20 trillion since Trump first took officeThe annualised fiscal deficit-to-GDP ratio also rose to 6.1 per cent in July from 5.7 per cent in June, according to Jefferies.Rising Treasury yields emerge as…
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