Trillion-Dollar T-Bill Tsunami: Treasury’s Cash Replenishment Comedy!

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Money market funds, dear friends, are bracing themselves for a deluge of new Treasuries, as the US government prepares to replenish its coffers. 🏦💰

Indeed, over a trillion dollars worth of T-bills are set to flood the market in the next one to one and a half years, as the Treasury seeks to address a colossal fiscal deficit, according to Reuters. 🌊💸

On the demand side, money market funds have swelled to a record $7.4 trillion in assets last month, as investors scramble to lock in higher returns before the Federal Reserve might deign to cut rates later this year or next. 📈📊

As Deborah Cunningham, CIO for global liquidity markets at Federated Hermes, quipped to Bloomberg,

“Five-percent-plus rates were nirvana, four-percent-plus is still very good — and if we dip down into the high threes, that’s quite acceptable as well.”

Reuters reports that J.P. Morgan Chase, Barclays, and TD Securities have forecast new T-bill issuance to range between $900 billion and $1.6 trillion over the next 18 months, a significant leap following the recent debt ceiling resolution. 📢📊

However, in a CNBC Television interview, ex-Bridgewater Associates chief investment strategist Rebecca Patterson warned that the market for US debt is about to hit a rough patch. 🚨📉

“I think there are three main things driving the dollar [devaluation]. One is slightly lower frontend rates, interest rates over this period because currencies trade on rate differentials.

But I think more importantly and what’s different this time is that you’re seeing both re-allocation out of the US both by Americans diversifying and foreigners pulling back slightly. And then third and really importantly is hedging. So let’s say I’m a large overseas pension fund, and I have a tech equity exposure, and I want to keep it because I believe in the structural story, but I’m nervous about the dollar, I’m nervous about the Fed’s independence, I can hedge out that currency risk.

So even if money stays in US equities, which helps explain where we are today, you can still see that dollar weakness.”

Susan Hill, senior portfolio manager and head of the government liquidity group at Federated Hermes, noted that while the expected T-bill issuance may seem daunting, her firm welcomes it and “feels that we will have no trouble accommodating it.” 🤝💪

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2025-07-14 22:02