Wall Street Expects U.S. Short-Term Debt Issuance to Reach $1 Trillion
Major investment banks on Wall Street expect the U.S. Treasury to raise the issuance of short-term Treasury bills (T-bills) to about $1 trillion due to rising borrowing costs and an annual fiscal deficit pressure of about $2 trillion, forcing the Treasury to tilt its issuance structure towards the short end.
The numbers supporting this judgment are quite direct: in mid-September 2026, the yield on 10-year U.S. Treasuries briefly exceeded 5%, reaching a nearly 19-year high; currently, T-bills account for nearly 22% of the total U.S. national debt, and one-third of the outstanding public debt will mature within the next 12 months, indicating that massive refinancing demand will continue to pressure the short-end market; in recent months, the weekly issuance of T-bills has remained at a high level of over $500 billion.
The strategy led by Treasury Secretary Scott Bessent has been termed "Treasury Twist" by the market: on one hand, it reduces the issuance increment of long-term Treasuries, and on the other hand, it utilizes nearly $950 billion in cash reserves from the Treasury General Account (TGA) to initiate buybacks of 10- to 30-year Treasuries from September 9 to 10, with a single buyback scale exceeding $4 billion, aiming to lower long-end yields and avoid annual Treasury interest expenses exceeding $1 trillion.
There has also been a structural change in the demand side for short-term debt. According to the GENIUS Act, effective July 2025, stablecoin issuers must hold T-bills with maturities not exceeding 93 days as reserve assets, making Circle and Tether new major buyers of T-bills; analysts estimate that if the stablecoin market expands to $2 trillion by 2028, the resulting incremental demand for T-bills could reach $800 billion to $1 trillion. The Treasury Borrowing Advisory Committee (TBAC) has suggested maintaining the proportion of T-bills between 15% and 20%, leaving room for the Treasury to further increase short-term debt issuance.
Several major Wall Street investment banks have adjusted their positions and expectations for the quarterly refinancing announcement on November 4. Deutsche Bank, Morgan Stanley, and Citigroup are all calculating three scenarios: reducing long-term debt issuance, shifting new financing towards T-bills and short-term notes, and expanding buyback scales. Morgan Stanley's Martin Tobias expects the issuance of short-term notes to gradually increase while warning that "the risk of direct cuts to long-end issuance has risen"; BMO Capital Markets' Ian Lyngen believes "the possibility of reducing Treasury issuance can no longer be ruled out," calling it the beginning of a "new regime"; Citigroup's Jason Williams suggests clients build long positions in 20-year Treasuries, citing their relatively low valuation compared to 30-year and 10-year Treasuries; Bank of America strategists similarly define the current situation as the starting point of a "new era of active intervention."
In terms of capital flows, the Treasury is transferring short-term financing demand to money market funds, bank cash management accounts, and stablecoin issuers through increased T-bill issuance, while using TGA cash to buy back long-term debt, essentially hedging duration itself. Beneficiaries include institutional investors holding long-term debt and stablecoin issuers seeking short-duration reserve assets; the pressure point is the Treasury's own rolling refinancing costs, as T-bill rates are more sensitive to policy rates, and if short-end rates remain high, refinancing costs will rise faster than those of locked-in long-term debt. This round of adjustments is policy-driven rather than a spontaneous market choice, with the market currently pricing in the formal refinancing announcement in November.
The total size of the U.S. Treasury market has exceeded $31 trillion, and the national debt surpassed $40 trillion in September; the current cash balance in the Treasury General Account is about $950 billion, leaving ample ammunition for subsequent buyback operations.
Source: Public Information
ABAB AI Insight
Bessent has been managing the duration of Treasury debt with unconventional tools since taking office. In August, he signaled the potential use of nearly $950 billion in TGA cash to support the buyback plan, officially launching the buyback of 10- to 30-year Treasuries from September 9 to 10, marking a key step from verbal statements to actual operations for "Treasury Twist." This path is structurally similar to the Fed's Operation Twist in 2011—both aim to lower long-end rates and raise short-end rates—but this time the operator has shifted from the central bank to the Treasury itself, a rare case in history where the Treasury actively intervenes in the shape of the yield curve.
The funding path is clear: the Treasury shifts the marginal increase in new financing from long-term Treasuries to T-bills while using cash from the TGA account to buy back long-term debt in the market, injecting buying pressure back into the long-end market to suppress yields; the direct motivation is that the 10-year yield has surpassed the 19-year high of 5%, and if long-term debt issuance continues to increase under the original structure, annual interest expenses are likely to exceed the psychological threshold of $1 trillion. Another capital path comes from the stablecoin reserve demand created by the GENIUS Act—Circle and Tether are required to hold T-bills maturing within 93 days, effectively turning the floating capital of the stablecoin industry into a source of short-term funding for the Treasury. Analysts expect this channel could bring in $800 billion to $1 trillion in incremental buying pressure in the future.
The most direct historical analogy is the Fed's Operation Twist in 2011, when the Fed sold short-term debt to buy long-term debt to lower long-end rates. This time, the roles are reversed: the Treasury sells short-term debt and buys back long-term debt, moving operations that traditionally belonged to the central bank's monetary policy toolbox into the Treasury's debt management framework. Another comparable path is Japan's long-standing practice of shortening the average duration of government bonds to control interest burdens. In terms of industry positioning, U.S. Treasury management is transitioning from "passive financing" to "active yield curve intervention," with the Treasury's role increasingly resembling that of a quasi-central bank market participant.
At its core, this represents a transfer of pricing power. In the past, long-end yields of U.S. Treasuries were primarily determined by the Fed's policy path and market expectations of inflation and growth; now, the Treasury is reclaiming long-end pricing power from the traditional "central bank-market" binary structure through adjustments in issuance structure and active buybacks, along with the rigid buying pressure created by the GENIUS Act. This transfer occurs because T-bills have shorter maturities and are more sensitive to short-term policy rates; the Treasury can influence the entire yield curve's shape by adjusting the supply of short-term debt without relying on Fed rate cuts—this is a structural change that bypasses the central bank and directly uses debt management tools to intervene in interest rate pricing.
ABAB News · Law of Cognition
Whoever controls the switch of short-term funds controls the entire interest rate curve.
The shorter the borrowing, the less confidence there is in its future.
The more active short-term funds are, the more exposed the thinness of long-term trust.