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2026-10-31 00:10:27
JPMorgan Chase's strategists noted that "short-term U.S. Treasury valuations are unlikely to see a significant rebound in 2025. With a substantial increase in bond supply expected in 2027, the pressure from this concentrated supply release may become more pronounced; the money market will need to absorb the massive supply of short-term U.S. Treasuries given that demand growth is likely to be lower than in previous years." The strategists cautioned that downward pressure on short-term U.S. Treasury prices could also spill over into the funding market, especially if money market funds significantly reduce their repurchase agreement allocations to accommodate more short-term Treasuries, or if the funding market becomes more sensitive to the settlement dates of short-term Treasuries. The spillover effect would be more significant in such cases. The strategists also mentioned that changes to the debt ceiling may have an impact in the spring of 2025, and the U.S. Treasury may keep the balance of its general account (TGA) at a relatively low level, making the supply and demand dynamics of the funding market even more unpredictable.
