The US Treasury has ramped up sales of short-term bills this month as the government borrows more money. This strategy has found plenty of willing buyers but has sparked debate about the risks of relying too heavily on near-term financing.

Rising Bill Supply

Growing federal deficits and higher interest payments have pushed US borrowing needs sharply higher, leading Treasury to increase issuance of short-term debt. Money market funds, the biggest buyer of bills, have absorbed this debt quickly.

Some analysts cautioned that a prolonged reliance on short-term debt leaves the government vulnerable to shifts in interest rates because the debt must be refinanced more frequently than longer-dated bonds. The average maturity of US government debt is about six years, which is shorter than Britain’s and Japan’s but broadly in line with most major developed economies.

Wells Fargo’s macro strategist Angelo Manolatos noted that net bill issuance in July so far has already exceeded his forecast for the entire month. The surge in July Treasury bill issuance reflects the government’s need to rebuild its cash balance and finance seasonal spending.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.