USD Rates: Bill financing getting expensive
Bills may not be that cheap from a financing perspective as the Fed hikes.
Group Research - Econs, Eugene Leow28 Sep 2026
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Rapidly rising US Treasury yields is a problem for Treasury Secretary Bessent. The US’s fiscal issues are well known. Sticky and rising spending across Social Security and Medicare, declining corporate tax revenues and the hiccup over tariff collections. Beyond all these, there is also the USD 82bn increase in interest spending over the past year (interest payments make up about 4.6% of GDP) to contend with as debt gets refinanced at higher rates. We lay out some thoughts below. 



The most direct implication of Fed hikes is that bills financing will not work as well. Bills as a proportion of marketable debt is already close to 25%, high by historical standards. Typically, these levels are only hit when there is a crisis (GFC and Pandemic) and the government needs monies urgently. The current issuance mix toward bills is probably geared towards reducing interest costs as borrowing longer-term costs more. This presents a problem for refinancing. In so far as the Fed would stay independent, short-term rates would have to rise in respond to firm economic momentum. In this case, “hiding” in the front of the curve will no longer be that effective. A 75bps jump in frontend financing costs (when all the bills roll over and assuming the Fed hold at 4.5%) would cause financing costs to balloon by around USD 54bn, all else equal. It is also pretty clear that financing for 10 years at > 5% would be equally unpalatable. 

Eugene Leow

Senior Rates Strategist - G3 & Asia
[email protected]



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