The U.S. national debt is closing in on $40 trillion, and Bank of America Research strategist Michael Hartnett's "Anything but Bonds" framework has never looked more relevant. Hartnett's core warning is straightforward: the United States is accumulating too much debt, which forces the government to issue too many bonds. Investors, in turn, demand compensation for that fiscal risk—making long-duration Treasuries unattractive relative to other assets.

According to the Treasury's official data, the national debt stood at roughly $39.9 trillion in mid-August and is expected to cross the $40 trillion threshold as early as this week. The government's outstanding debt comprises both intragovernmental holdings and debt held by the public. The pace of the buildup has accelerated: the debt reached $30 trillion only in early 2022 and passed $35 trillion in mid-2024, meaning the final stretch of the current climb took roughly two years. The total now also exceeds the value of an entire year of U.S. economic output.

Hartnett, Bank of America's chief investment strategist, has made the country's fiscal deterioration 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. Independent scorekeepers at the Congressional Budget Office point in the same direction, projecting that federal debt will keep climbing as a share of the economy over the coming decade.

The concern, as he frames it, is not simply that the government owes a great deal of money. It is that the government must continually refinance and issue fresh debt, creating an ever-larger supply of bonds for investors to absorb. The Federal Reserve, for its part, has spent the past several years shrinking its own portfolio of Treasuries as it unwinds pandemic-era purchases, leaving private investors to absorb a larger share of new issuance. If investors grow less willing to buy that debt at existing yields, the government has to offer higher interest rates to attract them.

That dynamic is already visible in the Treasury market. The yield on the 10-year Treasury has reached 4.6%, while the 30-year yield has hit 5.2%. Those elevated yields reflect concerns over inflation, fiscal sustainability, and the sheer volume of government borrowing. Those same concerns have reshaped the credit backdrop: all three major rating agencies—S&P Global in 2011, Fitch in 2023, and Moody's in May 2025—have stripped the U.S. of its triple-A rating, each citing the government's debt and deficit path among their concerns.

For bond investors, rising yields cut both ways. Newly issued bonds become more attractive because they pay higher income, but existing bonds lose value as market yields climb. The longer a bond's maturity, the more sensitive its price generally is to changes in interest rates—a reality that leaves long-duration Treasuries particularly exposed if investors keep demanding higher returns to compensate for fiscal and inflation risks.

Even if bonds look unappealing through the Bank of America strategist's lens, the bond market remains one of the clearest gauges of the economy's underlying health. Treasury yields capture 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. Treasury rates help set the baseline cost of borrowing throughout the economy, and higher yields can translate into more expensive mortgages, corporate loans, and consumer credit—potentially slowing investment, housing, and spending.

The fiscal backdrop is intensifying. The federal government 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 generates more interest payments, and those interest payments can mean larger deficits, ultimately forcing the Treasury to issue even more securities to cover the borrowing. 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 is why Hartnett is looking beyond traditional fixed-income investments, arguing that the risk-reward balance has changed. He points to assets including gold—which has repeatedly set record prices in recent years amid sustained buying by central banks and investors—as well as equities and opportunities in areas such as biotech and real estate.

The signposts ahead are concrete: the Treasury's quarterly refunding announcements, where the department sets the size of upcoming bond auctions, and demand at long-dated sales, which offers a real-time read on how much extra compensation investors require to keep financing U.S. deficits.

"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."

This story was originally featured on Fortune.com.