Edward Conard

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  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
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  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
Upside of Inequality Oxford Unintended Consequences

AI Summary. Bank of America expects the US Treasury to lean more heavily on short-term bill issuance, lifting bills to about 25% of outstanding debt from about 20%. Its strategists estimate the resulting reduction in longer-dated note and bond supply is equivalent to roughly $1tn of 10-year notes, worth at least 31 basis points of lower yields.

Elizabeth Stanton Bloomberg
Date Posted:
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A Bank of America analysis suggests Treasury’s anticipated decision to issue more short-term bills may drive the 10-year yield lower by more than 25bps. That decision would likely result in bills accounting for 25% of outstanding debt, up from 20% today.

Does heavier short-term bill issuance lower long-term Treasury yields?

Core argument: Bank of America strategists led by Meghan Swiber estimate the anticipated shift toward bill supply over the 2026 and 2027 fiscal years is equivalent to about $1 trillion of 10-year notes, a supply cut worth at least 31 and as much as 34 basis points.

Treasury officials are slated to unveil their financing strategy for November to January on Nov. 5, and Bank of America expects them “to lean more heavily on bill supply.” That would lead to bills accounting for about 25% of the outstanding debt, up from about 20%. The upshot is relatively less supply of notes and bonds maturing in two to 30 years, which should support their value and allow them to trade at lower yields, strategists led by Meghan Swiber said in a report. Over the 2026 and 2027 fiscal years, the anticipated increase in the relative bill supply is equivalent to about $1 trillion of 10-year notes, a supply cut they estimate is worth at least 31 basis points and as much as 34 basis points.

Takeaways by Macro Roundup® AI

  1. Bank of America strategists led by Meghan Swiber estimate the anticipated shift toward bill supply over the 2026 and 2027 fiscal years is equivalent to about $1 trillion of 10-year notes, a supply cut worth at least 31 and as much as 34 basis points.
  2. Bank of America expects Treasury officials to lean more heavily on bill supply, lifting bills to about 25% of outstanding debt from about 20%.
  3. Treasury officials are slated to unveil their November-to-January financing strategy on Nov. 5, and Bank of America says relatively less supply of notes and bonds maturing in two to 30 years should support their value and allow them to trade at lower yields.

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  • Passive Shortening — The US Treasury issues longer-term securities on a regular schedule and absorbs swings in financing needs through short-term bills, putting it on track to modestly shorten its debt maturity structure. As short-term debt grows, government interest expense becomes more closely tied to the Federal Reserve's policy rate.
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