Bloomberg Surveillance · Thursday, August 27, 2026
Andrew Sheets of Morgan Stanley notes that US government debt has reached $40 trillion, a significant acceleration with half of it accumulated in the last 10 years. Despite the large number, the bond market currently appears unconcerned, showing low volatility and modest inflation expectations.
“The debt to GDP is now 128% up from 40% maybe 40 years ago.”
“Now, I think the good news is that objectively, the bond market is currently fine with that number. Rates of implied volatility in the bond market are pretty low. Levels of inflation expectations are still pretty modest.”
“So it's very hard to look at the bond market and say that there's some big objection to the number. Auctions are still being taken down.”