The US government is expected to borrow up to $1.09 trillion through short-term Treasury bills over the next year, according to Wall Street forecasts cited in a Financial Times report. US Treasury bill issuance projections from Bank of America stand at $1.07 trillion for the fiscal year to September 2027, while JPMorgan forecasts $1.09 trillion for calendar 2027 and Goldman Sachs estimates $961 billion. Treasury bills mature in a year or less, making them cheaper to issue in the short term but requiring constant refinancing.
BofA’s estimate would push the total stock of outstanding bills to approximately $8 trillion, or 24.3% of all marketable Treasury debt, by next September. Goldman projects that figure reaching 24.9% by 2028, approaching levels last seen during the pandemic. The official target set by the Treasury Borrowing Advisory Committee is “around 20% over time,” described as a reasonable balance between interest rate costs and rollover risk.
This comes as the Federal Reserve raised rates for the first time in three years on Wednesday, lifting them to a range of 3.75% to 4% and signalling further increases ahead. Long-term US borrowing costs have climbed to their highest level since 2007, with 10-year Treasuries yielding approximately 5% and 30-year debt at 5.3%. For context on how rising bond yields are rippling across global markets, see our earlier coverage of Japan’s bond yield approaching a critical government budget threshold.
Bessent Is Doing What He Criticised Yellen For
Treasury Secretary Scott Bessent has sought to contain long-term borrowing costs, last month surprising markets 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 previously and publicly criticised his predecessor Janet Yellen for pursuing. He had argued that Yellen had “taken control of monetary policy” and “eased financing conditions substantially” ahead of the 2024 election through the same mechanism he is now relying on.
An administration official pushed back on the scale of concern, noting that since 1970, bill issuance as a share of total issuance has averaged 24.3%, and that the current figure of 22.8% sits below that historical average. Former Bessent economic counsellor Joe LaVorgna agreed, saying the numbers look large primarily because deficits themselves are large, and that as a ratio the situation is “not totally out of whack by historical standards.”
Not everyone agrees. Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said the focus on short-term debt “leaves us really vulnerable to high levels of rollover risk.” Mark Cabana of BofA warned the Treasury is risking a “larger and more volatile” interest bill by leaning so heavily on bills at a moment when the Fed is raising rates. The Iran war’s role in driving this inflation pressure is examined in our report on how oil above $100 forced a Federal Reserve rate hike back onto the table.
US Treasury Bill Issuance at This Scale Is a Slow-Moving Risk
The administration’s historical average argument is technically accurate and strategically misleading at the same time. Yes, 22.8% of Treasury debt in bills is below the long-term average. But that average includes periods when the overall debt load was a fraction of what it is today, when interest rates were structurally lower, and when the Fed was not in an active rate-hiking cycle. Applying a historical percentage to a historically unprecedented debt stock produces a number that looks manageable in ratio terms and alarming in absolute ones.
The core problem is timing. The US is leaning into short-term borrowing precisely when the cost of rolling that debt over is rising, when the Fed has just raised rates and signalled more increases, and when long-term rates are at a 17-year high. Every bill that matures in the next 12 months will be refinanced at rates higher than when it was issued.
That compounding effect on debt service costs is what makes this a structural vulnerability. Bessent is navigating a genuinely difficult position, but the fact that he criticised this exact approach before adopting it suggests he understands the risk better than the public messaging implies.
This article is for informational purposes only and does not constitute financial advice.
