What actually happened in the US bond market crash?
Let’s understand it through numbers. On August 19, 2026, the US Treasury Department confirmed that America’s total national debt has crossed 40 trillion dollars. Just 5 months ago, it was 39 trillion dollars. Think about it—1 trillion dollars was added to the debt in just 5 months. And listen further, 5 months before that, the debt was 38 trillion dollars.
This means that every 5 months, 1 trillion dollars of debt is being added, which equates to 200 billion dollars monthly.The most shocking thing is that this debt has doubled within a 10-year timeframe.
When Trump first became President in January 2017, the national debt was slightly less than 20 trillion dollars. And today, it has reached 40 trillion dollars. America’s debt has now surpassed the combined GDP of many countries.
If you divide America’s total debt by its entire population, there is a debt of 117,000 dollars per person.
When US bond yields are offering a 5.34% risk-free return to the investors, why would anyone take a risk in India to earn just 7% to 8%.
Nikunj Saraf, CEO of Choice Wealth,:
States that rising US bond yields are tightening global liquidity and making safer US fixed-income assets much more attractive.
Now, let’s understand the drama of Indian bond yields. Since the start of the Iran war, India’s 10-year government security yields have increased by around 0.34%. IndusInd Bank estimates that it could touch 7.45% by the end of 2026, while Kotak Mahindra is projecting a range of 6.8%.
Let’s look at an example to see how this will affect the Indian public. When oil becomes expensive – inflation rises. If inflation rises, the RBI may hold or raise interest rates. This directly impacts your car loan, personal loan, and home loan.
According to reports (RBI), this indicates that a rate hike could occur before the year-end.
Now, let’s understand the impact on mutual funds. The yields of gilt funds and long-duration funds will go up, causing bond prices to fall. In equity markets, due to higher discounting, the present value of future earnings will decrease, which will especially hit growth stocks and tech stocks.
Furthermore, the dollar is currently trading at 96 rupees, meaning the rupee has depreciated by around 10% against the dollar over the last year. Oil has become expensive, and the rupee has weakened. As a result, our import bill has gone up, which has also expanded our current account deficit.