U.S. National Debt Breaks $39 Trillion for First Time, 30-Year Yield Surges Near 4.9%; Japan, UK, and China Continue to Increase Holdings

U.S. federal debt has quietly surpassed a new threshold of $39 trillion amid the Middle East conflict escalation. As tensions persist, market concerns over fiscal deterioration are reflected in the bond market: the 30-year U.S. Treasury yield surged to nearly 4.9%, with the traditional “safe haven” function of bonds almost failing during this conflict.

Source: U.S. Treasury Department

Oil prices rose in tandem with geopolitical tensions, further squeezing American households’ consumption space and adding uncertainty to the Federal Reserve’s interest rate path. Analysts point out that the inflationary effects brought by the war are far greater than recession risks, which explains why U.S. Treasuries are not attracting capital as they did during past crises.

Foreigners Still Buying: Japan, UK, and China All Increased Holdings in January

Contradictorily, despite the ongoing deterioration of fiscal prospects, data from the U.S. Treasury shows that foreign holdings of U.S. debt increased in January: up by $34.8 billion to $9.31 trillion, reversing a significant decline of $88.3 billion in December last year.

Breaking down the main holders: Japan, the largest creditor, increased holdings by $39.8 billion to $1.23 trillion; the UK added $29.3 billion to $895.3 billion; China increased by $10.9 billion to $694.4 billion.

At the same time, Treasury Secretary Bessent explicitly stated that the claim “Europe is selling off U.S. debt” is false, emphasizing that foreign holdings data do not support the market’s panic narratives.

Why Are Foreigners Still Buying?

“Knowing that U.S. fiscal health is worsening, why are they still increasing holdings?” The answer may lie in the unique status of U.S. Treasuries.

The U.S. bond market has an average daily trading volume exceeding $600 billion, making it one of the most liquid assets globally. For central banks and sovereign funds, holding Treasuries is not just about yield; it’s about an irreplaceable liquidity buffer and foreign exchange reserve needs.

Even if rising yields imply paper losses, no other assets can meet such scale of allocation in the short term. This logic may be the fundamental reason why the $39 trillion debt continues to circulate in the market: not because no one recognizes the risks, but because there are no alternatives.

The Complex Signals of High Debt and High Yields

From a crypto asset perspective, this data sends a contradictory signal.

On one hand, the ongoing deterioration of U.S. fiscal health and debt expansion are long-term positives for Bitcoin as a “hard asset”; on the other hand, the 30-year yield approaching 4.9% raises the opportunity cost of risk assets, exerting short-term pressure on risk markets.

Whether Bessent’s tough stance can stabilize market confidence, and how the Middle East conflict’s trajectory further impacts oil prices and inflation expectations, will be key variables influencing the crypto market and U.S. Treasuries moving forward.