Core Viewpoint - The changing profile of U.S. debt holders is leading to higher and more volatile interest rates, impacting various borrowing costs and raising concerns about the financial system's stability [2]. Changing Profile Of Debt Holders - Foreign governments now hold less than 15% of the Treasury market, a significant decline from over 40% in the early 2010s [3]. - The Federal Reserve has reduced its Treasury holdings by approximately $1.5 trillion in recent years [3]. - Private investors have filled the gap left by foreign governments, but their profit-driven approach has resulted in increased interest rates [4]. - Hedge funds have doubled their presence in the U.S. debt market, contributing to market volatility [4]. Changing Fiscal Priorities - Interest payments on the national debt have surpassed defense spending, with the U.S. now paying more in interest on its national debt, which exceeds $38 trillion, than on national defense [5]. - The rapid increase in national debt, surpassing $38 trillion amid a federal government shutdown, has raised alarms about financial stability [6]. Economic Implications - Economists warn that the $38 trillion debt poses a significant threat to national security and global standing, potentially leading to a "national security crisis" [7]. - Despite concerns, bond vigilantes have not targeted U.S. debt, focusing instead on Japan, with long-term yields remaining under control despite persistent inflation and heavy issuance [8].