JPMorgan: U.S. Treasury Bill Demand May Not Keep Pace With 2027 Supply

JPMorgan strategists Jay Barry, Pankaj Vohra and others said U.S. Treasury bill issuance is expected to keep expanding, with the market needing to absorb $991 billion in net supply in 2027, making demand’s ability to keep pace a key question. According to Sina Finance, the strategists see some headwinds: They expect money market fund assets under management to grow at roughly the pace seen during the larger inflows in 2024 or 2025, unless a major market disruption comparable to the 2020 pandemic shock or 2023 regional banking stress occurs. The strategists said foreign official investors’ recent pullback has been tactical rather than structural, leaving room for them to resume a steadier pace of short-term Treasury purchases. They said a similar recovery is unlikely in the stablecoin sector unless cryptocurrencies rebound or the regulatory environment becomes clearer. Treasury bill valuations are unlikely to reverse sharply to more expensive levels next year, and pressure may be particularly evident during the 2027 supply increase as money markets absorb the additional bills and demand may grow more slowly than in previous years. The strategists said lower bill valuations could also affect funding markets, particularly if money market funds sharply reduce repo allocations to buy more bills or funding markets become more sensitive to bill settlement dates. The debt ceiling could begin to factor in next spring, when the U.S. Treasury may reduce its general account balance, making funding market conditions harder to assess. Money market fund assets under management have stalled over the past two months. Although the strategists expect a seasonal rebound during the rest of 2026, they project growth of only about 5% for the year, compared with double-digit growth in each of the previous two years. In the four months through August, foreign investors reduced their holdings of short-term U.S. Treasuries by about $145 billion, bringing foreign official investors’ share of holdings to 4.3%, its lowest level since May 2024. Stablecoin growth has also stalled this year. Fiat-backed stablecoin supply has fluctuated between $265 billion and $280 billion, while stablecoin holdings of Treasury bills total $127 billion, or 2% of all Treasury bills, down from $137 billion in December 2025.