The U.S. national debt is hurtling toward $40 trillion, and Bank of America Research strategist Michael Hartnett’s “Anything but Bonds” framework is becoming ever more applicable. Boiled down, Hartnett warns the US is accumulating too much debt, which causes the government to issue too many bonds—and investors want compensation for the fiscal risk—making long-duration Treasurys unattractive compared to other assets. Here’s why the climbing debt makes the advice worth a listen.
The U.S. national debt stands at roughly $39.9 trillion in mid-August and is expected to cross the $40 trillion threshold as early as this week. According to the Treasury’s official data, the government’s outstanding debt is made up of both intragovernmental holdings and debt held by the public.
Hartnett, Bank of America’s chief investment strategist, has turned that fiscal deterioration into one of his central investment themes. His “Anything but Bonds” call reflects his view that investors should be wary of long-duration government debt while the U.S. continues to run large deficits and the market demands higher yields to finance them. He expects the national debt to reach $50 trillion by 2029.
The concern is not that the government owes a lot of money. It’s that the government has to continually refinance and issue more debt, creating a larger supply of bonds that investors need to absorb. If investors become less willing to buy that debt at existing yields, the government has to offer higher interest rates to attract them.
This dynamic is already visible in the Treasury market. The yield on the 10-year Treasury reached 4.6%, while the 30-year yield hit 5.2%. Those elevated yields reflect the concerns over inflation, fiscal sustainability and the sheer amount of government borrowing. For bond investors, rising yields are a double-edged sword.
New bonds become more attractive because they offer higher income, but existing bonds lose value when market yields rise. The longer the maturity of the bond, the more sensitive the price generally is to changes in interest rates. That makes long-duration Treasurys particularly vulnerable if investors continue to demand higher returns to compensate for fiscal and inflation risks.
And while bonds may not be an attractive investment according to the Bank of America strategist, the bond market can represent one of the clearest gauges of the economy’s underlying health. Treasury yields reflect what investors think about inflation, economic growth, interest rates and the government’s ability to manage its finances.
When yields rise, the implications extend far beyond bond portfolios, especially due to Treasury rates helping setting the baseline cost of borrowing throughout the economy. The higher yields can translate into more expensive mortgages, corporate loans and consumer credit—potentially slowing investment, housing and spending.
The federal government has borrowed $1.8 trillion during the first 10 months of fiscal 2026, including $432 billion in July alone. That borrowing creates a feedback loop. More debt creates more interest payments, and the interest payments can mean larger deficits. Ultimately, the Treasury must issue even more securities to make up for the borrowing. And the scale is already massive.
The interest bill on the national debt has climbed to roughly $1.4 trillion over the past year, according to Hartnett’s latest outlook. He argues the “Anything but Bonds” trade is unlikely to end until five-year Treasury yields fall below roughly 3.25%.
That explains why Hartnett is looking beyond traditional fixed-income investments. His argument expands that risk-reward has changed. Hartnett points to assets including gold and equities—and even opportunities in areas such as biotech and real estate.
“The U.S. stock market hit an all-time high on the same day that the U.S. Treasuries issued at their highest yield in 25 years,” Hartnett said in the report. “That’s reality.”