US Treasury Plans to Borrow $1 Trillion in Next 3 Months

The newest borrowing data triggered discussions surrounding Treasury Secretary Scott Bessent’s debt issuance strategy.

U.S. dollar bills in Washington, in a file photo. Madalina Vasiliu/The Epoch Times

The U.S. government will borrow more than $1 trillion over the next three months, the Treasury Department projects.

According to the latest marketable borrowing estimates, released on July 28, the Treasury expects to borrow $1.007 trillion during the July-to-September quarter.

This is nearly double the previous estimate of $554 billion in April, “primarily due to the lower beginning-of-quarter cash balance and projected lower net cash flows,” the Treasury said in a statement announcing the estimates.

During the October-to-December period, the Treasury anticipates that it will borrow $590 billion, assuming a cash balance of $850 billion at the end of December.

New data confirmed that the Treasury borrowed $65 billion during the April-to-June quarter and finished the quarter with a cash balance of $457 billion.

In recent months, officials have drawn on the Treasury General Account—the federal government’s primary checking account held at the Federal Reserve Bank of New York—amid the debt ceiling debate.

At the start of fiscal year 2025, the cash balance stood at more than $885 billion. Earlier this month, it declined to below $290 billion.

Now that the One Big Beautiful Bill Act has raised the debt ceiling by $5 trillion, the Treasury is looking to replenish its account.

As of July 24, the balance stands at more than $333 billion.

Further details regarding the Treasury’s quarterly refunding will be published on July 30.

These numbers elicited a muted reaction in the U.S. bond market.

Supply and Demand

The Treasury Department has flooded global capital markets with U.S. government bonds over the past few years.

Since 2021, the federal government has issued more than $14 trillion in Treasury securities, covering a range of maturity lengths.

In total, outstanding Treasury securities amount to nearly $29 trillion.

Treasury officials have concentrated a large share of debt issuance in Treasury bills, or T-bills, which range from 30 days to one year in maturity. Gross issuance of T-bills over the past four years has exceeded $6 trillion.

The objective behind leaning heavily into T-bills is that short-term instruments maintain lower interest rates, allowing the government to better manage its interest costs. T-bills also enable officials to adjust their strategies in response to evolving market conditions.

Despite the tsunami of T-bills circulating through international financial markets, a solid appetite for them remains at home and abroad.

Money market funds, for example, have been the largest buyers of short-term debt securities. In May, foreign holdings of T-bills totaled $398 billion, representing a 56 percent increase from the same time in 2024.

U.S. officials will release a full breakdown of their near-term strategy on July 30, but market watchers should not expect seismic changes.

Treasury Secretary Scott Bessent has signaled that it is unlikely the government will accelerate sales of long-term securities due to their yields, retaining the debt-issuance plan of his predecessor, Janet Yellen.

“Why would we do that? The time to have done that would have been in 2021, 2022,” Bessent said in a June 30 interview with Bloomberg Television.

Treasury Secretary Scott Bessent testifies before the House Ways and Means Committee on Capitol Hill on June 11, 2025. Madalina Vasiliu/The Epoch Times

At the time, investors poured into the Treasury market, sending yields lower. The one-year yield traded between 0.1 percent and 2 percent. The 10-year yield was usually below 3 percent during this two-year span.

Today, the one-year Treasury yield is hovering at around 4.1 percent. Conversely, the 10-year is trading above 4.4 percent. Yields on 20- and 30-year bonds are close to 5 percent.

While Bessent has previously noted that the administration is focused on bringing the benchmark 10-year Treasury yield down, the White House has ratcheted up a pressure campaign on Federal Reserve Chair Jerome Powell to lower interest rates.

The rate-setting Federal Open Market Committee will convene its policy meeting this week, and investors overwhelmingly anticipate the central bank to leave the benchmark federal funds rate—a key policy rate that influences business, consumer, and government borrowing costs—at a range between 4.25 percent and 4.5 percent.

According to the CME FedWatch Tool, the futures market is penciling in a quarter-point rate cut in September. The Fed’s June Summary of Economic Projections, a quarterly survey of officials’ expectations for future policy and economic conditions, forecasts that the median policy rate will finish the year at 3.9 percent.

Rate cuts by monetary policymakers would typically bring down yields. However, the opposite occurred when the U.S. central bank initiated its easing cycle in September 2024.

On Sept. 18, 2024, when the Fed followed through on a super-sized half-point rate cut, the 10-year yield stood at 3.69 percent. By mid-January, it reached a peak of 4.8 percent.

Still, the administration is betting on Fed rate cuts to alter its Treasury bill issuance endeavors.

Trump, who has repeatedly criticized Powell for not cutting rates, told reporters in June that he would wait until Powell’s term expires in May 2026 before making Treasury bill adjustments.

“What I’m going to do is I’m going to go very short-term,” the president said. “Wait until this guy gets out, get the rates way down, and then go long-term.”

While auction data suggest no significant weakness in demand, investors will continually demand higher compensation, according to Torsten Slok, chief economist at Apollo Global Management.

“With debt levels growing much faster than GDP [gross domestic product], the bottom line is that Treasury issuance will continue to grow faster than the economy, and the most likely outcome is that investors will demand compensation in the form of higher long-term interest rates,” Slok said in a note emailed to The Epoch Times.

Last week, a $13 billion sale of 20-year bonds drew solid demand, yielding a high rate of 4.93 percent, approximately 2 basis points below the market estimate.

Recent trends—a falling U.S. dollar, a ballooning debt-to-GDP ratio, and $9 trillion that needs to be refinanced over the next 12 months—suggest that higher yields will be the norm in the Treasury market, he added.

However, Bessent and other senior administration officials say the president’s economic agenda entails growing the economy faster than the debt.

“We can grow our way out of this,” Bessent said in a May 23 Fox News interview. “If we change the growth trajectory of the country, of the economy, then we will stabilize our finances and grow our way out of this.”

At the same time, uncertainties surrounding the president’s trade policies have sparked concerns about foreign investors’ appetite for continuing to purchase U.S. government debt.

A July 9 paper by the Kansas City Fed suggested that domestic investors have primarily financed recent U.S. Treasury issuance.

“Without commensurate increases in demand for similar reasons, investors may be limited by their willingness to increase U.S. Treasury purchases over other higher-yielding investments,” the regional central bank economists wrote. “As the United States issues more debt, these changes are likely to put upward pressure on yields and term premiums and generate greater market volatility.”

Persistent volatility could diminish the investment’s safe-haven allure, they said.