Treasury Auctions $1 Trillion in 4-Week Bills Amid High Demand

The U.S. Treasury Department has announced plans to auction 1000 billion dollars worth of four-week Treasury bills this week, marking a historic high in issuance. This move follows a record-breaking auction of six-week Treasury bills earlier this week, highlighting the Treasury Department's continued preference for short-term financing to meet the growing expenditure needs of the federal government.

The Treasury Department's schedule for this week's auction indicates that the issuance of four-week Treasury bills will increase by 50 billion dollars to 1000 billion dollars, while the issuance of eight-week and seventeen-week Treasury bills will remain unchanged at 850 billion dollars and 650 billion dollars, respectively. Although the increase in issuance is modest compared to the previous month's significant rise of 250 billion dollars for both four-week and eight-week Treasury bills, the overall supply remains at a high level.

The Treasury Department's aggressive expansion of issuance is partly driven by the robust demand for short-term national debt. With current Treasury bill yields exceeding 4%, investors are eager to acquire these securities. According to data, inflows into ETFs holding short-term national debt reached 167 billion dollars in the second quarter of this year, more than doubling from the same period last year.

Additionally, the Treasury Borrowing Advisory Committee has noted that the recent increase in stablecoin issuance has become a new source of demand. According to the Talent Act, stablecoin issuers must back their cryptocurrencies with safe assets such as national debt, indirectly driving the purchase of Treasury bills.

The Treasury Department's decision to increase the issuance of Treasury bills is not only to meet current financing needs but also to rebuild the cash buffer that was depleted due to debt ceiling issues. The Treasury Department has indicated that the supply of short-term national debt will continue to grow marginally in the short term and may further expand in October.

Notably, the Treasury Department has no immediate plans to increase the issuance of long-term national debt. A month ago, the Treasury Secretary stated that the current federal funds rate is too high, making long-term debt issuance costly and unattractive. The President also indicated in late July that the administration has been instructed not to issue debt with a maturity of more than nine months.

Market interest in long-term national debt remains to be seen. The auction of 10-year Treasury notes on Wednesday will provide some insights, while the response to the auction of 3-year Treasury notes on Tuesday was relatively lukewarm. Analysts have pushed back their expectations for an increase in long-term debt issuance from May 2026 to November 2026, and from February 2025 to May 2025, respectively.