New Delhi, Aug. 23 -- US fiscal deterioration is increasingly becoming a key risk for global markets, with higher Treasury yields potentially putting pressure on equities and constraining the Federal Reserve's policy flexibility, Jefferies said in its latest research report.

The brokerage said the US public debt has crossed the $40 trillion milestone even as the fiscal deficit continues to widen, creating an environment in which long-term borrowing costs could remain elevated.

The US fiscal deficit rose to $432 billion in July, the highest monthly deficit since March 2021 and a record for the month. The deficit for the first 10 months of the fiscal year reached $1.799 trillion, already exceeding the full-year FY25 deficit of $1.775 tril...