While investors fixate on the AI boom, a warning from a group of Wall Street bankers whose job is to help the U.S. government borrow went unnoticed.
In minutes released Aug. 5, the Treasury Borrowing Advisory Committee—a panel of senior bond dealers and investors, known as TBAC, that advises the Treasury on its own funding—warned that at current auction sizes, the government faces a $1.45 trillion funding shortfall in fiscal 2027–28.
What that means takes a primer to understand how Washington actually borrows. The Treasury doesn’t take out one huge annual loan, rather, it raises cash by selling debt at regularly scheduled auctions. The shortest-dated IOUs, sometimes called “T-bills,” come due in a year or less, while the longer-dated notes and bonds — known as “coupons” — run anywhere from two to 30 years.
The T-bills offer Washington, now, a rare opportunity to borrow money for the cheap.
At the time of writing, the three-month bill yielded around 3.8%, while the 10-year Treasury yield sat around 4.6%, and the 30-year at a multi-decade high above 5%. So what Treasury Secretary Scott Bessent has done is lean unusually hard on the cheaper rate today to finance a roughly $2 trillion annual deficit. That holds down reported borrowing costs but leaves the government more exposed to inflation and rising rates.
