TAG Industrial Watch: August 22 2026

Over the last week, financial headlines have been bombarded with news regarding the national debt. The most recent report of foreign holdings of U.S. Treasuries showed a big drop of $72 billion for the month of June, nearly all of which was accounted for by governments (Reuters). In July, the federal budget deficit exploded by over 48% year-over-year to $432.3 billion, posting a record low for that month (Yahoo!Finance). For the first time, the national debt crossed the $40 trillion threshold, doubling in just nine years (Aljazeera). In response to the symbolic increase in the national debt and the recent rise of long-term Treasury rates, the Secretary of the Treasury, Scott Bessent, announced that the Treasury would double down on its strategy of “buying back” long-term debt with short-term loans (CNBC).

Since 2021, TAG has educated its clients about the likely economic consequences of the mounting national debt. Now, Wall Street is beginning to see the writing on the wall. While Bessent’s announcement was intended to reduce long-term interest rates, rates on 10-, 20-, and 30-year Treasuries rebounded sharply the next day. The stock market, which hitherto had ignored rising interest rates and the national debt, finally paused for concern over the government’s fiscal problems. Human history has repeatedly shown that when government debts become unsustainable, the solution has typically been inflation. Since December, the Federal Reserve has quietly inflated the money supply to purchase $349 billion worth of Treasuries to keep interest rates at bay (FRED). With Bessent’s announcement, the Fed will likely start purchasing more Treasuries, especially now that long-term bondholders (such as foreign governments) are presented with an exit strategy.

Just like a dog chasing its own tail, the Treasury and the Fed may struggle to keep a lid on interest rates if holders, concerned about inflation, dump their Treasuries in lieu of other assets like gold. Just as we saw in 2023, sudden increases in interest rates, which compress the spread between cap rates, can quickly dampen demand for industrial properties. With interest rates poised for liftoff, industrial investors considering a sale should not hesitate.

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