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Bond market braces for $1T in new Treasuries as debt ceiling resolution nears

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The U.S. bond market is preparing for up to $1 trillion in new Treasury issuance in the second half of 2025, pending resolution of the federal debt ceiling. Strategists expect most new debt to be in short-term maturities like bills and two- to seven-year notes. The surge aims to finance the rising fiscal deficit, which the Congressional Budget Office estimates will grow by $2.8 trillion over a decade due to President Donald Trump’s tax-and-spending bill. Experts warn the influx could disrupt repo markets and push up short-term borrowing costs. While money market funds may absorb some of the new supply, recent shifts toward private repos could limit their participation.

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