Wall Street Warns US to Issue $1 Trillion in Short-Term Debt as Borrowing Costs Climb
Key Takeaways
- Bank of America, JPMorgan, and Goldman Sachs forecast $961 billion to $1.09 trillion in US short-term bill issuance over the coming year.
- The outstanding stock of bills could reach roughly $8 trillion, or 24.3% of marketable Treasury debt, approaching pandemic-era peaks.
- Treasury Secretary Scott Bessent is balancing long-term rate suppression through buybacks against heavy short-term issuance, a policy he once criticized Janet Yellen for.
- Analysts warn that heavy reliance on bills increases rollover risk and debt-servicing volatility, though administration officials say ratios remain below historical averages.
- Stablecoins are being highlighted as a growing source of demand for Treasury bills, alongside $8 trillion in money market fund assets and Fed purchases.
Wall Street Forecasts a $1 Trillion Short-Term Borrowing Surge
Wall Street banks expect the US government to borrow up to $1 trillion over the coming year by selling short-term Treasury bills, deepening Washington's reliance on fast-maturing debt that exposes the government to rising interest rates.
Bank of America forecasts roughly $1.07 trillion in net bill issuance, excluding money raised to repay maturing debt, for the fiscal year ending September 2027. JPMorgan projects $1.09 trillion in calendar 2027, while Goldman Sachs expects $961 billion.
The shift toward bills, which mature in a year or less, comes as long-term US borrowing costs have climbed to their highest level since 2007. A rising public debt load, massive corporate borrowing tied to the AI boom, and upgraded economic growth expectations are all pushing yields higher.
Bessent Balances Long-Term Costs Against Short-Term Supply
Treasury Secretary Scott Bessent has tried to cap long-term borrowing costs, surprising markets last month with plans to expand purchases of 10-to-30-year Treasuries. At the same time, his department has continued expanding short-term debt sales to meet record borrowing needs, a policy Bessent once criticized his predecessor, Janet Yellen, for pursuing.
Bessent claimed Yellen had "taken control of monetary policy" and "eased financing conditions substantially" ahead of the 2024 US election.
Bill Share Could Near Pandemic-Era Peaks
BofA's estimate would lift the outstanding stock of bills to roughly $8 trillion, or 24.3 per cent of marketable Treasury debt, by September. Goldman sees that figure hitting 24.3 per cent next year and 24.9 per cent in 2028, close to a recent peak during the pandemic.
Those projections sit well above the official target of "around 20 per cent over time" set by the Treasury Borrowing Advisory Committee, which advises the Treasury on the trade-off between interest costs, financing volatility, and rollover risk. Over the past two decades, bills have only topped a quarter of outstanding debt around the pandemic and the 2008 financial crisis. The longer-term average since the 1980s is 22.4 per cent, and it regularly exceeded 30 per cent in the early 1980s.
Analysts Split on the Risks
Mark Cabana, head of US rates strategy at BofA, said the Treasury is "trying to balance supply and demand" in the government bond market but risks a "larger and more volatile" interest bill by issuing so much short-term debt. Adam Josephson of Sakonnet Research echoed that view, warning that "the more volatile its debt-servicing costs become."
Joe LaVorgna, a former economic counsellor to Bessent and now chief economist for the Americas at SMBC Nikko Securities, disagreed that the rise was "such a big deal." He argued the absolute numbers look large only because deficits are large, and that the ratio itself "doesn't look totally out of whack by historical standards."
An administration official noted that since 1970, when the US began running consistent budget deficits, bill issuance as a share of total issuance averaged 24.3 per cent. As of last month, it stood at 22.8 per cent, below the long-term average, with a 21.7 per cent average during the current Trump term.
Rollover Risk and Stablecoin Demand
Governments worldwide have increasingly turned to short-term debt because it typically carries lower borrowing costs and is less sensitive to worries about issuance scale than longer-term bonds. One-year bills yield about 4.4 per cent, compared with roughly 5 per cent on 10-year debt and 5.3 per cent on 30-year debt.
But constant refinancing needs are feeding anxiety about US public finances, especially after the Federal Reserve raised rates for the first time in three years to a range of 3.75 per cent to 4 per cent and signalled more increases ahead. Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, warned that the focus on short-term debt "leaves us really vulnerable to high levels of rollover risk."
The Fed itself has absorbed large amounts of bills, buying $250bn in the first half of this year alone, meaning net issuance reaching the public market is well below bank estimates. US money market funds, with assets of $8 trillion, remain ready buyers. Bessent has also highlighted stablecoins — crypto tokens tracking the dollar and backed by safe assets such as short-term government debt — as another demand source.
Some analysts expect the Treasury's expanded buybacks of long-term debt, aimed at curbing rising yields, to be funded through short-term issuance, adding further pressure to sell more bills. A Treasury official said issuance was "informed by trends in structural demand," citing money market fund assets near $8 trillion, stablecoins as a key growth source as **Genius Act rules are finalised, and the Fed's purchases of more than $300bn** in bills this year.
Deficits Remain the Elephant in the Room
Since the Joe Biden era, the federal government has struggled to contain yawning fiscal deficits. The Congressional Budget Office expects the deficit to remain around 6 per cent of GDP across its 10-year forecast horizon, more than double Bessent's 3 per cent goal for the end of Donald Trump's second term.
Bessent has said the US can grow its way out of its debt burden. "In the US, we don't have a revenue problem.
We have a spending problem. So we've tried to contain the spending and then with 3 per cent growth, we grow our way out of this," he said earlier this month.
Coinasity's Take
The Treasury's growing reliance on short-term bills is a double-edged sword for crypto markets. On one hand, it reinforces the role of stablecoins as a structural source of demand for US government debt, strengthening the narrative that dollar-pegged tokens are becoming a pillar of the financial system.
On the other, the ballooning bill stack and elevated rollover risk underscore the fiscal fragility that makes Bitcoin and other hard-capped assets attractive as hedges. If long-term yields keep climbing and the Fed stays hawkish, expect the debate over crypto as a sovereign-debt alternative to intensify.
DISCLAIMER
This article is for informational purposes only and does not constitute financial advice. Cryptocurrency investments involve substantial risk and extreme volatility - never invest money you cannot afford to lose completely. The author may hold positions in the cryptocurrencies mentioned, which could bias the presented information. Always conduct your own research and consider consulting a qualified financial advisor before making any investment decisions.
About Alex Carter-Knight
Alex Carter-Knight is a veteran crypto trader, former Ethereum miner, and market analyst with 8+ years in the space. He breaks down institutional flows, on-chain data, and macro trends with clarity and edge.
“I don’t chase pumps. I chase logic.”
