STOCKS | U.S. Treasury Seen Acting Like a Shadow Central Bank in Rate Setting Debate

The article says the U.S. Treasury is increasingly relying on Treasury bill financing, making its balance sheet more sensitive to overnight rates and raising risks to market stability and the real returns on stocks and bonds. According to Sina Finance, the Treasury is also moving into policy areas that were once the Federal Reserve's domain, including Treasury buybacks. The Treasury has said it wants to limit growth in long-dated debt issuance and shift more financing needs to Treasury bills. Treasury bills account for 22.7% of outstanding U.S. Treasury debt, above the Treasury's informal 20% cap, or 24.1% if Federal Reserve holdings are excluded. The article argues that a larger share of short-term, money-like liabilities could add liquidity, create inflation pressure, and make it harder for the Federal Reserve to tighten policy without affecting Treasury financing costs. It also says money market funds could shift from repos into Treasury bills if new supply pushes bill prices lower and yields higher, increasing the risk of sudden stress in short-term funding markets.