Major financial institutions on Wall Street are forecasting that the United States could raise up to one trillion dollars through the sale of short-term Treasury bills over the coming year. This growing reliance on shorter-dated debt leaves Washington increasingly vulnerable to fluctuations in interest rates. According to projections from Bank of America, net borrowing via Treasury bills during the next fiscal year ending September 2027 is estimated at about $1.07 trillion, excluding funds used for maturing debt rollovers. JPMorgan anticipates $1.09 trillion in bill issuance for the 2027 calendar year, while Goldman Sachs has pegged the figure at $961 billion.

This push toward bills with maturities of one year or less comes as long-term U.S. financing costs have climbed to levels unseen since 2007, fueled by a swelling national debt, significant corporate borrowing for artificial intelligence ventures, and upward revisions to economic growth forecasts. Treasury Secretary Scott Bessent has been striving to contain these elevated long-term borrowing costs. Last month, he surprised markets by unveiling an expanded program for the Treasury's purchases of 10- to 30-year bonds. Simultaneously, the department has continued its policy of enlarging short-term debt issuance to satisfy the government's record-breaking financing requirements.

Bessent has previously criticized his predecessor, Janet Yellen, for implementing this strategy. He accused Yellen of “taking control of monetary policy” and “significantly easing financial conditions” ahead of the 2024 presidential election. Bank of America calculates that the stock of outstanding Treasury bills will reach roughly $8 trillion by next September, representing 24.3% of all marketable U.S. debt. Goldman Sachs anticipates that proportion will hit 24.3% next year, climbing to 24.9% by 2028, approaching the peaks observed during the pandemic period. The Treasury Borrowing Advisory Committee, a panel of market participants advising the department, has a long-term target of keeping this metric “in the neighborhood of 20%,” a level balancing interest costs, financing volatility, and rollover risk.

Over the last two decades, bills as a share of total debt have only briefly surpassed 25%, doing so during the pandemic and the 2008 financial crisis. Looking back further, the average stood at 22.4% since the 1980s, although it was consistently above 30% during the early part of that decade. Mark Cabana, head of U.S. rates strategy at Bank of America, noted that while the Treasury is attempting to “balance supply and demand” in the bond market, issuing such a substantial volume of short-term debt carries the risk of larger interest expense and heightened volatility. Adam Josephson of Sacconette Institute echoed this sentiment, stating that “the volatility of debt service costs will become higher.”

However, Joe LaVorgna, a former economic advisor to Bessent, does not view the rising share of bills as a “serious problem.” LaVorgna, now chief economist for the Americas at SMBC Nikko Securities, remarked: “The absolute numbers look high, rooted in the sheer size of the deficit itself. But the focus should be on the ratio, and by that measure, it has not completely deviated from a reasonable range when compared to history.” A U.S. government official provided additional context: “Since 1970, when the U.S. began running persistent fiscal deficits, bills have averaged 24.3% of total debt issuance. As of last month, that figure was 22.8%, below the long-run historical average. Under the current Trump administration, the average has been 21.7%.”

Governments worldwide are increasingly turning to short-term debt, which typically offers cheaper financing costs. Such instruments are also less sensitive to concerns about the scale of issuance compared to long-term bonds, and their yields move closely with central bank policy rates. Currently, the one-year Treasury bill yields around 4.4%, while the 10-year note yields approximately 5% and the 30-year bond about 5.3%. Yet with the Federal Reserve having raised its benchmark rate to a 3.75%-4% range on Wednesday—the first hike in three years—and signaling further increases ahead, the continuous need to refinance bills as they mature amplifies concerns about the escalating risks in U.S. public finances. Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a bipartisan organization, warned: “Over-reliance on short-term debt leaves us highly exposed to significant debt rollover risk.”

The Federal Reserve has itself been a major buyer of Treasury bills, purchasing $250 billion in the first half of this year alone, which means the net new issuance absorbed by the open market is considerably lower than the banks' estimates. In public markets, U.S. money market funds remain steady purchasers of bills, with assets in these low-risk savings products totaling $8 trillion. Bessent is also looking to stablecoins as an additional source of demand for bills. Stablecoins are dollar-pegged crypto tokens backed by reserves held in safe assets, including short-term government securities.