Who buys the bill deluge? The US Treasury's new marginal buyer

A debt issuance always reads at two ends: how much the state sells, and who buys. We described the first end in our analysis of the drained liquidity cushion: the US Treasury is borrowing $671 billion net this quarter, largely through short-term bills, while the reverse repo facility, the window where money funds parked their cash and out of which the money came to buy bills, has fallen to $1.2 billion. The shock absorber is gone. That leaves the second end, less commented on yet decisive: who now absorbs the deluge? The answer traces an order book that has changed composition, and it is that composition, more than the volume, that deserves attention.

The first buyer, and its limit

The largest taker of Treasury bills remains, by far, money market funds. Their assets reached a record of about $7,890 billion in the week of 15 July 2026, per the Investment Company Institute, with government-securities funds making up the bulk. Such a mass constantly seeks short paper to remunerate, and Treasury bills are its natural vehicle, as our guide to money market funds details.

The limit lies in one word: appetite varies. Those same funds saw their assets fall by nearly $60 billion in the week of 15 July, and their preference swings continuously between bills and repo, depending on the relative yield of the two. When repo pays better, cash leaves bills for the pledged loan. The first buyer is therefore vast, but it is not a captive acquirer: it compares, and it can turn away from the Treasury’s window without notice.

The new entrant the law compels

Alongside this fickle giant, a buyer of an unprecedented kind has entered: stablecoin issuers. The market for dollar-pegged tokens passed $300 billion in 2026, and the GENIUS Act, in force since 2025, requires domestic issuers to hold full backing in high-quality liquid assets, essentially Treasury bills and overnight repo, with no ability to pass the yield to holders. In practice, every additional dollar of stablecoin mechanically translates into a purchase of short-term government debt.

The amounts are becoming significant. Tether reports more than $141 billion of Treasury exposure, ranking it among the twenty largest holders of US government debt worldwide; Circle parks about 80% of USDC reserves in a BlackRock-managed government money fund that buys only bills and repo. This is a buyer structurally insensitive to price, bound by law to buy whatever the yield, exactly the mechanic we described in our piece on stablecoins as the marginal buyer of US Treasuries. Still small against the $7,890 billion of money funds, but growing, and above all captive, where the rest of the book is not.

Foreign demand is changing in nature

The third reservoir, foreign holders, whose total stood above $9,500 billion in early 2026, up 6% year on year. But composition matters more than the total. The Treasury’s TIC data put Japan first at end-2025 with $1,186 billion, followed by the United Kingdom at $863 billion and China at $684 billion. The ranking tells of a shift: the United Kingdom has moved ahead of China, not because London saves more, but because the hedge funds domiciled on its market book the basis trade there, that highly leveraged bet on the gap between the cash and futures price of Treasuries.

The nuance is first-order. Demand of official origin, like China’s central bank, is stable and price-insensitive; demand from leveraged funds is opportunistic and can unwind at once. As China trims its pool and British leverage grows, the quality of the foreign book deteriorates: more demand, but more fragile. Japan, the top holder, faces its own bond-market strains, described in our analysis of Japanese fiscal dominance, which erode its capacity to absorb others’ debt.

The banks and the great absentee

Two players remain, one constrained, the other gone. Banks could absorb more government debt, but their capacity runs into the leverage ratio, the SLR, which weighs Treasuries and reserves without risk-weighting. The US reform of late 2025 eased that constraint to give room back to Treasury-market intermediation, a project we tracked in our piece on the Basel III rollback by US regulators. The easing helps, it does not turn banks into an unlimited buyer.

The great absentee is the Federal Reserve. Long the primary buyer through its purchase programmes, it is now shrinking its balance sheet and letting part of its portfolio roll off. The taker that, in 2020 and 2021, mechanically absorbed new debt has left the table. The order book must therefore do without both its largest historical buyer and its liquidity cushion at once.

Demand is not lacking

Caution requires setting out the opposite reading, because it is robust. At no point has the deluge struggled to clear: auctions cover, money funds have nearly $7,900 billion to churn, foreign demand is at a record $9,500 billion, and stablecoins add a new and growing buyer. The Treasury bill remains the most sought-after cash equivalent on the planet, and it always finds a taker. Talk of a buyers’ strike would be a misreading.

The serious objections bear not on the market’s capacity to absorb, but on the price and the soundness of the marginal taker. A book where captive demand shrinks and leveraged demand rises absorbs the debt, but at a higher yield and with a nearer breaking point. The basis trade in particular already showed in March 2020 that a forced unwind could freeze the most liquid market in the world, a risk we x-rayed in our study of the Fed’s record exposure to the basis trade.

The price, not the taker

What follows is a signal to watch, not a forecast. The first is the yield demanded at bill auctions, whose level and tail will tell at what price the book clears. The second is the share of leverage in foreign demand, readable in TIC data and in funds’ futures positions. The third is the trajectory of stablecoin assets, the only buying flow that grows by regulatory construction. The fourth is money funds’ behaviour between bills and repo, which decides at the margin the appetite for Treasury paper.

The bill deluge will find a taker; that was never the real question. It is at what price, and on whose shoulders. A book that loses its central buyer, the Fed, and its cushion, reverse repo, must lean on a mix of fickle giants, law-bound buyers and leveraged funds. The debt will clear, but the yield it demands and the fragility of those who carry it are, from now on, the real barometer.

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Data and primary sources: Investment Company Institute, money market fund assets; US Treasury, foreign holders of debt (TIC data) and TIC system; Congressional Research Service, ownership of Treasury debt (RS22331). The stablecoin backing framework stems from the GENIUS Act, whose application we detail in our guide mapping the GENIUS Act regulators.

To go further: our analysis of the drained liquidity cushion for the supply side; our guides reading TIC data, reading money market funds and reading the Treasuries market; our pieces on stablecoins as marginal buyers, the leveraged basis trade and the Basel III rollback. Money fund and foreign debt holdings move weekly or monthly; the levels cited are those of mid-2026 releases, with TIC country data dating from December 2025. Stablecoin holding figures come from their attestations and the specialist press, cited as such.