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