The Great Treasury Bill Shortage

The market for U.S. Treasury bills—which mature in one year or less—is poised to shrink, creating a shortage and helping keep government borrowing costs near record lows. The Treasury Dept. will issue about $72 billion less in bills than it will pay off in December and January, bond strategists at JPMorgan Chase estimate. The result may be even lower interest rates for investors and money-market funds.

The contraction partly reflects a surge in corporate taxes that the Treasury collects this time of year, lessening its need to borrow. It also underscores a shift in the financing strategy of the government, which boosted bills outstanding to a record $2.07 trillion in August 2009 as it raised cash to bail out the nation’s banks. As those stresses abated, the amount of bills outstanding has dropped to $1.48 trillion, or about 15 percent of all Treasury debt, the smallest percentage in almost half a century.