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 heavy sell-off. 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 that the Federal Reserve’s rate hike probability by October has risen to 50%, due to market concerns that 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’ worries; soaring 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 is no longer pricing in rate cuts in 2026 but is beginning to factor in a certain probability of rate hikes, which is driving yields sharply higher.”

U.S. debt 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 exceeds $39 trillion, only 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, a pace unprecedented in modern U.S. history outside wartime or severe financial crises.

The Peterson Foundation’s official website shows that U.S. debt grows 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 pointed out that the biggest concern is the enormous cost of just paying off this debt. It is estimated that in fiscal year 2026 (October 1, 2025 – September 30, 2026), net interest payments on U.S. debt will exceed $1 trillion. In just the first three months of FY2026, net interest payments reached $270 billion, already surpassing the same period’s defense spending. With an average monthly interest of $90 billion, this amount could build eight advanced Ford-class nuclear-powered aircraft carriers or 900 F-35 fighters (Note: a Ford-class carrier costs about $11 billion; an 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 project. 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 borrowing expenses.

The Government Accountability Office (GAO) states that rising government debt will have multiple impacts on Americans and businesses: higher mortgage and auto loan costs; 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 borrowing 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 FY2026 to FY2036, U.S. debt as a percentage of GDP will soar from 101% to 120%, breaking the post-WWII record of 106%.

The Wharton School’s 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, possibly triggering a fiscal crisis. No matter how we measure our fiscal health, we are clearly heading in the wrong direction.”

War spending is a key driver of the rapid rise in debt

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

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

U.S. media reports on the unprecedented scale of U.S. debt exceeding $39 trillion mention that this milestone comes just weeks after the U.S. launched military strikes against Iran, with war causing oil prices to soar and the U.S. economy 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 on the 18th said the Pentagon has requested approval from the White House to apply for over $200 billion in budget funds from Congress for the Iran war. The funds will be used to “urgently increase the production of key weapons systems” to replenish munitions consumed during 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, demanding detailed explanations from the Pentagon.

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, reporters asked Trump at the White House why, if he expects “Iran conflict won’t last 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 by Trump in February provides nearly $840 billion in discretionary funds, and the “Big and Beautiful” FY2025 tax and spending bill allocates $156 billion to the Pentagon. Combined, these appropriations total nearly $1 trillion, which looks particularly “eye-catching” as U.S. debt exceeds $39 trillion for the first time.

Senate Appropriations Committee Republican Chair Susan Collins told reporters on the 18th that the Pentagon’s requested budget “is significantly higher than expected” and called for a public hearing on the budget request.

AP notes that although Congress is controlled by Trump’s Republican Party, many conservative-leaning Republican lawmakers lack enthusiasm for military actions and large expenditures. Meanwhile, most Democratic lawmakers may oppose the budget request and demand more detailed explanations from the Trump administration regarding its goals for action against Iran. Some Democrats have previously questioned the legality of the White House’s plans to strike Iran.

Currently, if the budget request is to be approved, Republican leaders in Congress may have two options: either negotiate a “stalemate” with Democrats on related provisions or strike a deal on other issues of concern to Democrats, which could further increase the overall budget.

Easing sanctions on Iran, Russia, and Venezuela oil

Trump repeatedly acts to stabilize oil prices

The prolonging Iran conflict continues to impact oil prices, U.S. inflation, and the overall economy. Economist Owen John Anthony, a former nominee for the U.S. Bureau of Labor Statistics director, warned that the U.S. economy cannot withstand oil prices over $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 in the coming 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 held by U.S. citizens and crewed by Americans.

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

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

The U.S. has urgently approved $16.5 billion in military sales 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, anti-drone systems, and other military equipment.

Additionally, the U.S. also approved about $7 billion in military sales to the UAE, which was part of previous agreements, so the State Department did not announce it separately. 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 strike against Iran on February 28, the U.S. continues to promote regional arms sales, approving a new $16.5 billion sale to Israel on March 6, and this time involving 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.