Bank of America warns bond investors as U.S. debt nears $40 trillion

The U.S. national debt is approaching $40 trillion, according to Treasury data, and Bank of America’s research chief Michael Hartnett warns that this fiscal trajectory threatens the attractiveness of long-dated government bonds. He explains that continual borrowing expands the bond supply, prompting investors to demand higher yields, which are already near 4.6% for ten-year and 5.2% for thirty-year Treasurys. Higher yields boost new-issue income but depress the market value of existing bonds, especially those with longer maturities.

Hartnett’s “Anything but Bonds” stance suggests shifting to alternatives like equities, gold, biotech and real estate until five-year yields dip below about 3.25%. He also points out that rising Treasury rates raise borrowing costs across the economy, affecting mortgages, corporate loans and consumer credit. The strategy reflects his view that the risk-reward balance for U.S. debt has fundamentally changed.