US federal debt hits $40 trillion amid shifting bond market trends

The United States federal debt has reached $40 trillion, a milestone accompanied by shifting dynamics in the global bond market. Norway’s sovereign wealth fund, managed by Norges Bank Investment Management (NBIM), has proposed a strategic reallocation of its assets. The fund aims to reduce its exposure to government bonds to seek higher risk premiums.

This shift could result in a $75 billion reduction in the fund’s holdings of US Treasuries. Conversely, the proposal suggests a potential $20 billion increase in Japanese government bond holdings, while projected holdings in euro area government bonds may decrease.

Economic analysts note that rising US debt levels and fluctuating oil prices have contributed to pressure on Treasury yields. The 10-year yield recently exceeded 4.75%, reflecting investor concerns regarding the scale of US government debt and the Federal Reserve's potential interest rate trajectory.