Wall Street Expects Short-Term U.S. Debt Issuance to Reach $1 Trillion

Wall Street banks expect that the U.S. will borrow approximately $1 trillion over the next year by issuing short-term government bonds to meet financing needs. Bank of America forecasts that the new borrowing will amount to about $1.07 trillion by the new fiscal year ending in September 2027; JPMorgan estimates the short-term bond issuance will be around $1.09 trillion, while Goldman Sachs predicts it will be $961 billion. As short-term bond issuance increases, the long-term borrowing costs in the U.S. have risen to their highest levels since 2007. Bank of America anticipates that by next September, the outstanding short-term government debt will rise to about $8 trillion, accounting for 24.3% of the tradable government debt; Goldman Sachs expects this ratio to be 24.3% next year and rise to 24.9% by 2028. Analysts say that increasing short-term bond issuance can help lower current financing costs but may also raise future refinancing risks. Mark Cabana, head of interest rate strategy at Bank of America, stated that the Treasury is balancing supply and demand in the bond market, but a large issuance of short-term bonds could lead to greater and more volatile interest expenses. The Federal Reserve has purchased a significant amount of short-term government bonds this year, and the approximately $8 trillion in assets held by money market funds also supports demand for short-term bonds.