Megabill passed, leading to increase in short-term Treasury bill supply, concerns about reliance on short-term funding

President Trump’s plan for tax and spending cuts has been passed, leading to a flood of short-term Treasury bills to finance the U.S. deficit. Yields on these bills have risen above 4%, with money-market investors eager to buy. Concerns remain about the risks of relying on short-term funding. Treasury Secretary Scott Bessent supports issuing bills over bonds. The nonpartisan Congressional Budget Office estimates an increase in the national deficit due to Trump’s plan. A surge in T-bill supply could lead to fresh volatility in the market.

Bond yields rose in response to June’s strong jobs report, with all major U.S. stock indexes closing higher. Trading was limited ahead of the Fourth of July holiday. The Treasury Borrowing Advisory Committee recommends increasing the percentage of T-bills in the government’s debt. Rates strategists predict T-bill supply may reach up to 25% of marketable debt. Demand for front-end debt remains high, with the Treasury Department acknowledging this trend. Despite potential pressure on T-bill rates, there is confidence in the market’s ability to handle any imbalances.

Read more at Yahoo Finance: Now that the megabill has passed, expect a ton of short-term debt to be sold to finance the government’s deficit