$1 Trillion in New Treasury Bills: US Government Shifts to Short-Term Borrowing

The US government is expected to issue around $1 trillion in new Treasury bills over the next year, according to forecasts from major Wall Street banks. Bank of America predicts $1.07 trillion, JPMorgan estimates $1.09 trillion, and Goldman Sachs projects roughly $961 billion in net Treasury bill issuance.

This comes as long-term Treasury yields have climbed to nearly two-decade highs, with the 30-year rate reaching about 5.35%. To avoid locking in these elevated costs for decades, the government is opting for short-term borrowing through Treasury bills that mature within a year.

However, this shift also introduces rollover risk, as the government must repeatedly replace maturing bills at potentially higher interest rates. With federal debt already above $40 trillion and heavy issuance contributing to rising Treasury yields, there are concerns about the sustainability of this strategy.

The increased demand for short-term government debt is driven by money-market funds holding significant amounts of short-term debt, as well as stablecoin issuers using Treasury bills as reserve assets. As a result, higher short-term yields can increase income earned on products like USDC and USDT.