US Treasury borrowing is set to lean further towards short-term bills, with Bank of America, JPMorgan and Goldman Sachs expecting issuance to exceed $1 trillion over the next year. The forecasts would take outstanding Treasury bills to roughly $8 trillion by next September and increase the share of marketable federal debt that must be refinanced quickly.
Treasury bills are US government debt instruments with maturities of one year or less. Bank of America and Goldman Sachs expect them to account for about 24.3% of marketable Treasuries by next September. Another estimate puts the outstanding short-term balance at 24.9%, above the official 20% threshold.
The Treasury has already shortened the maturity profile of its borrowing. Since May 2024, it has swapped $104B of long-term bonds into short-term bills. Ordinary borrowing has also leaned heavily on bills since 2024.
The department has used buyback operations as part of that approach. In a buyback, the Treasury buys outstanding securities from dealers before they mature and pays the market price. The operations retire longer-dated securities while replacement borrowing is concentrated in bills, further increasing the share of debt due within a year.
Bank of America forecasts that the United States will net borrow approximately $1.07 trillion through Treasury securities issuance in the current fiscal year ending September 2027. JPMorgan projects Treasury securities issuance of $1.09 trillion for the 2027 calendar year. Goldman Sachs estimates $961 billion in Treasury securities issuance.
The estimates cover different periods, though they point in the same direction: borrowing on a trillion-dollar scale. Treasury bill sales near $1 trillion would leave Washington more exposed to refinancing challenges and to future movements in interest rates, since a greater portion of its debt would come due over a shorter period.
Foreign investors have reduced their exposure to short-term Treasuries during the shift. They sold $43.5 billion in short-term Treasury bills in May 2024 and a further $29 billion in June 2024. The cumulative reduction over the two months was roughly $72.5 billion.
Overseas institutions' holdings of US short-term Treasuries fell from approximately $1.43 trillion in May to $1.40 trillion in June. The available figures do not give reasons for the sales or indicate whether the reduction will continue.
The contrast with other purchases in June is clear. Foreign investors bought only $6.8 billion in long-term Treasuries that month, while buying $181.4 billion in US equities. Tether directly held $114.96 billion in short-term Treasury bills in Q2.
The Treasury's strategy has therefore increased its reliance on a part of the market where demand from overseas institutions recently weakened. The banks' forecasts suggest the bill share will remain above the official threshold by next September. It remains unknown whether the Treasury will alter its debt-management approach as that share rises, or how the buybacks will affect overall market liquidity.
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