The Treasury Department is facing competition from companies issuing their own bonds, possibly leading to higher rates, says Apollo Chief Economist Torsten Slok. Estimates show $2.25 trillion in investment grade debt coming this year, with the AI boom pushing companies to fund infrastructure investments through bonds.

U.S. federal debt has surpassed $38 trillion, with $601 billion borrowed in the first three months of the 2026 fiscal year. Trump plans to increase defense spending to $1.5 trillion annually, potentially worsening budget deficits.

Despite Federal Reserve rate cuts, Treasury yields remain steady, suggesting little relief in debt-servicing costs. The influx of fixed-income products in 2026 may increase rates and credit spreads, according to Slok.

Former Treasury Secretary Janet Yellen warns of fiscal dominance as debt climbs toward 150% of GDP. U.S. debt holders have shifted to profit-driven private investors, increasing financial fragility during market stress.

Foreign governments’ share of Treasury bond holdings has decreased to less than 15%, down from over 40% in the early 2010s, impacting borrowing rates. This shift makes the U.S. financial system more vulnerable, warns Geng Ngarmboonanant.

Read more at Yahoo Finance: As U.S. debt soars past $38 trillion, the flood of corporate bonds is a growing threat to the Treasury supply