Key Facts
• July 14: U.S. debt ceiling raised to address fiscal deficit and secure funds.
• Treasury to issue over $1 trillion in short-term Treasury bills (T-bills) in 18 months.
• Money Market Funds (MMFs) hold $7.4 trillion in assets as of July 1, 2025.
• Federal debt ceiling increased by $5 trillion to $41.1 trillion after tax cuts.
• Treasury cash balance dropped to $313 billion by July 3, 2025.
• Analysts estimate T-bill issuance at $900 billion–$1.6 trillion over 18 months.
• June–August 2023: Treasury issued $1.1 trillion in T-bills, cash balance at $23 billion.
• Reverse Repo (RRP) balances fell from $2.5 trillion (Dec 2022) to $182 billion (July 2025).
• MMFs expected to shift funds from repos to T-bills due to higher yields (4.35% vs. 4.31%).
• MMF yields exceed bank deposit rates by 170 basis points, attracting household funds.
Summary
The U.S. Treasury plans to issue over $1 trillion in short-term Treasury bills (T-bills) over the next 18 months following a $5 trillion debt ceiling increase. Money Market Funds (MMFs), with record-high assets of $7.4 trillion, are expected to absorb the supply smoothly. Analysts project T-bill issuance between $900 billion and $1.6 trillion, supported by MMFs reallocating funds from repos to T-bills due to higher yields. Despite concerns over declining Reverse Repo (RRP) balances, MMFs remain well-positioned to manage the influx. The Treasury’s cash balance, which dropped to $313 billion in early July, highlights the urgency of these measures. With MMF yields significantly outpacing bank deposit rates, household funds are likely to continue shifting toward MMFs, ensuring robust demand for T-bills.
