US Treasury Bonds in Crisis: Sudden Mass Selloff! US Debt Breaks $3.9 Trillion, Monthly Interest Could Build 900 F-35s, Increased Probability of Fed Rate Hike! Add Another $200 Billion Military Spending to Strike Iran? Trump: Small Change

How AI Questions: How does the Middle East conflict push up U.S. Treasury yields?

Just as the Pentagon requests an additional $200 billion in military spending for the Iran conflict, with Trump calling it “just small money,” on March 18 local time, the U.S. Treasury Department released the latest data showing U.S. debt has surpassed $39 trillion.

On March 20 local time, U.S. Treasury bonds faced another wave of heavy selling. The yield on the 10-year U.S. Treasury suddenly jumped, approaching 4.39% as of press time, an increase of over 3%.

U.S. Treasury prices fell, bond traders increased bets, believing the probability of the Federal Reserve raising interest rates by October has risen to 50%, due to market concerns that a prolonged Middle East war could push global inflation higher. Additionally, short-term interest rate futures pricing reflects expectations of a rate hike by the Fed in December.

Sources point out that the additional uncertainty brought by the Middle East war has heightened traders’ concerns. Rising energy prices could exacerbate inflation and also bring downward pressure on the economy.

Gennadiy Goldberg, head of U.S. interest rate strategy at TD Securities, said: “As the Iran conflict escalates and prolongs, the bond market is clearly worried about further inflation pressures. The market has already priced out the rate cuts expected in 2026 and is now factoring in a certain probability of rate hikes, which is driving yields sharply higher.”

U.S. Treasury surpasses $39 trillion

Monthly interest payments amount to $90 billion

On March 18, local time, the U.S. Treasury Department released the latest data showing that as of March 17, the total federal debt exceeded $39 trillion. Analysts expect that before the midterm elections in fall, U.S. debt will break through $40 trillion.

Budget oversight agencies and economists agree that the growth rate of U.S. borrowing is “unsustainable,” and the U.S. is “clearly heading in the wrong direction.”

In recent years, U.S. debt has grown rapidly. By July 2024, U.S. debt surpassed $35 trillion; by November, it exceeded $36 trillion; by August 2025, it broke $37 trillion, and in just two months, it surpassed $38 trillion. Currently, U.S. debt has exceeded $39 trillion, just about five months after reaching $38 trillion for the first time in late October 2025.

Michael Peterson, CEO of the Peterson Foundation, estimates that at the current growth rate, U.S. debt will reach a “shocking” $40 trillion before the fall midterm elections. The foundation notes that the latest $1 trillion increase in debt took less than five months. Apart from wartime or severe financial crises, this pace of fiscal expansion is unprecedented in modern U.S. history.

The Peterson Foundation website shows that U.S. debt increases by $4.8 million per minute, $288 million per hour, and $6.9 billion per day. Source: CCTV News

The Peterson Foundation states that the U.S. fiscal situation has deteriorated to the “worst among comparable countries.” Meanwhile, Forbes reports that the biggest concern is the enormous cost of just paying off this debt. It is estimated that in the 2026 fiscal year (October 1, 2025 – September 30, 2026), net interest expenses on U.S. debt will exceed $1 trillion. In just the first three months of 2026, net interest payments reached $270 billion, already surpassing the same period’s defense spending. The average monthly interest payment is $90 billion, enough to build eight advanced Ford-class nuclear-powered aircraft carriers or 900 F-35 fighters (Note: one Ford-class carrier costs about $11 billion; one F-35 costs about $1 million).

This ongoing fiscal burden will be extremely heavy: over the next 30 years, U.S. government interest payments are projected to reach nearly $100 trillion, far exceeding any major federal program. Michael Peterson said: “Interest payments are the fastest-growing item in the federal budget.”

For ordinary Americans, the average personal interest expense over the next decade is at least $47,000 per person. A survey shows that 90% of Americans believe that rising debt is increasing living costs and driving up borrowing costs.

The Government Accountability Office (GAO) warns that rising government debt will have many impacts on Americans and businesses: higher costs for mortgages and car loans; reduced corporate investment leading to lower wages; rising prices for goods and services. Advocates for balanced budgets warn that the long-term trend of expanding debt and increasing interest payments will force Americans to make tougher financial choices.

A forecast report released by the Congressional Budget Office in February predicts that from fiscal year 2026 to 2036, U.S. debt as a percentage of GDP will soar from 101% to 120%, breaking the post-WWII record of 106%.

The Wharton Budget Model at the University of Pennsylvania previously predicted that without major policy adjustments, within about 20 years, the U.S. will be unable to roll over its accumulated debt, forcing the government either to default explicitly or to implement hidden default through inflation.

Magnus, president of the non-profit Committee for a Responsible Federal Budget, said: “The consequences of unchecked U.S. fiscal policy are already evident and will get worse. Higher debt will increase inflationary pressures, crowd out economic investment, make interest payments the main burden of defense spending, and make the U.S. more vulnerable to crises and geopolitical shocks. It could even trigger a fiscal crisis. No matter how we measure our fiscal health, we are clearly heading in the wrong direction.”

War spending is one of the main drivers of the rapid rise in debt

Trump: Additional $200 billion military spending is “small money”

Where does this huge debt come from? An AP report states that recent increases in U.S. debt are mainly driven by war spending, large-scale fiscal stimulus during the pandemic, and tax cuts.

U.S. media reports on the unprecedented scale of the $39 trillion debt, just weeks after the U.S. launched military strikes against Iran, which caused oil prices to soar and the U.S. economy to come under pressure.

According to Kevin Hasset, director of the White House National Economic Council, the U.S. has already spent over $12 billion on military operations against Iran that began on February 28. A senior U.S. government official said on the 18th that the Pentagon has requested the White House to approve a budget of over $200 billion to Congress for Iran-related war efforts. The funds will be used to “urgently increase the production of key weapons systems” to replenish munitions used in the Iran military operations.

President Trump and Defense Secretary Hegseth confirmed on the 19th that the Pentagon has applied to Congress for an additional approximately $200 billion to support operations against Iran. However, some lawmakers questioned this request and asked for detailed explanations.

Hegseth said at a press conference on the 19th that the budget request is to ensure that U.S. military operations already underway or planned are “adequately funded.” He also said the amount might be adjusted.

On the same day, a reporter asked Trump at the White House why, if he expects “Iran conflict to last not too long,” the Pentagon still needs such high military spending. Trump seemed to imply that the budget request covers not only the current Iran conflict but also other “multiple factors.” He said that in this “turbulent” world, the related budget is just a small expense for the U.S. military to “maintain its leading position.”

Reportedly, the budget request has not yet been formally submitted to Congress but has already faced criticism from Democratic and some Republican lawmakers. Senator Jack Reed, a Democrat on the Senate Armed Services Committee, said the request is “unacceptable,” especially as Americans face rising costs for gasoline and other essentials. Reed questioned whether the Trump administration’s decision to strike Iran was wise given the public’s hardships.

According to Reuters, some Democratic lawmakers also questioned why the Pentagon, which is “not short of money,” is now “asking for more.” The FY2026 defense appropriations bill signed into law by Trump in February provides nearly $840 billion in discretionary funds, and the “Big and Beautiful” tax and spending bill of July 2025 allocated $156 billion to the Pentagon. The combined appropriations total nearly $1 trillion, which looks particularly “eye-catching” as U.S. debt surpasses $39 trillion for the first time.

Senator Susan Collins, chair of the Senate Appropriations Committee, told reporters on the 18th that the Pentagon’s requested budget is “significantly higher” than expected and should be subject to a public hearing.

AP notes that although Congress is controlled by Trump’s Republican Party, many conservative-leaning Republicans lack enthusiasm for military actions and large expenditures. Meanwhile, most Democrats are likely to oppose the budget request and demand more detailed explanations regarding the goals of the Iran operation. Some Democrats have previously questioned the legality of the White House’s military actions against Iran.

Currently, if the budget request is to be approved, Republican leaders may have two options: either negotiate with Democrats in a “tug-of-war” over the terms, or strike a deal on other issues Democrats care about, which could further increase the overall budget.

Relaxing sanctions on Iran, Russia, and Venezuela’s oil

Trump repeatedly acts to stabilize oil prices

The ongoing Iran conflict’s impact on oil prices, U.S. inflation, and the overall economy continues to intensify. Owen John Anthony, an economist nominated by Trump to head the Bureau of Labor Statistics, warned that the U.S. economy cannot withstand oil prices above $100. U.S. media say the Trump administration faces a “fragile moment.”

According to CCTV International, U.S. Treasury Secretary Janet Yellen today (March 19) stated that the U.S. has not attacked Iran’s energy infrastructure and has allowed Iranian oil to continue flowing through the Gulf region, or will lift sanctions on Iranian offshore oil within the next few days.

Additionally, the U.S. may release strategic petroleum reserves again to curb oil prices.

Recently, the Trump administration has introduced several policies to curb rising oil prices. On the 18th, it announced a 60-day suspension of the Jones Act, lifting shipping restrictions between domestic ports. The Jones Act requires ships transporting goods between U.S. ports to be U.S.-built, registered, and flagged; most ownership must be U.S. citizens, and crews must be U.S. citizens.

Furthermore, on the 18th, the Trump administration relaxed trade restrictions on U.S. companies dealing with Venezuela’s oil industry. Last week, it also eased sanctions on Russian oil. On the 11th, the U.S. Energy Department announced the release of 172 million barrels from strategic petroleum reserves.

U.S. media point out that rising oil prices due to geopolitical conflicts will cost the U.S. economy dearly, especially with increases in gasoline and airline transportation costs. “For the Trump administration, which bets its economic policy on ‘affordability,’ this is a fragile moment.”

The U.S. urgently approved $16.5 billion in military sales plans to multiple Middle Eastern countries

On the 19th, the U.S. State Department announced approval of military sales worth about $16.5 billion to the UAE, Kuwait, and Jordan, including radar, counter-drone systems, and other military equipment.

Additionally, the U.S. also approved about $7 billion in military sales to the UAE. Since this sale only expanded previous agreements, the State Department did not release details. U.S. officials said these undisclosed deals include the sale of Patriot missiles worth about $5.6 billion to the UAE.

Special Commentator Su Xiaohui: We see that after the U.S.-Israel attack on Iran on February 28, the U.S. continues to promote regional arms sales, approving a new round of military sales to Israel on March 6, and this time, the $16.5 billion sale involves Arab countries. By constantly pushing arms sales in the region, the U.S. military-industrial complex gains greater profit margins for the future.

Editor | Duan Lian, Yi Qijiang

Proofreader | Zhang Yiming

Daily Economic News compiled from CCTV News, Xinhua News Agency, Securities Times, China Fund News, public sources, etc.

Daily Economic News