The US Department of the Treasury increases short-term government bond issuance, stabilizing demand for stablecoins as a new emerging buying force.

The U.S. Treasury Department announced that it will auction a total of $100 billion in four-week Treasury bills this week, marking a record high. This plan comes right after the record-breaking six-week Treasury bill auction on Tuesday, highlighting the Treasury Department's continued preference for short-term financing to meet the expanding spending needs of the federal government. According to the auction schedule released by the Treasury Department on Tuesday, the issuance size of the four-week Treasury bills will increase by $50 billion to $100 billion compared to the previous issuance, while the sizes of the eight-week and seventeen-week Treasury bills will remain unchanged at $85 billion and $65 billion, respectively. Although the increase in size this time is small compared to the previous significant increases of $25 billion for the four-week and eight-week Treasury bills last month, the overall supply remains high. One of the reasons for the Treasury Department's bold expansion of issuance is the strong demand for short-term government bonds in the market. The current yield on Treasury bills exceeds 4%, attracting investors. According to Dow Jones data, inflows into ETF funds holding short-term Treasury bills reached $16.7 billion in the second quarter of this year, doubling from the same period last year. In addition, the Treasury Borrowing Advisory Committee pointed out that the recent increase in "stablecoin issuance" is also a growing source of demand. According to the Cryptocurrency Act pushed by President Trump, stablecoin issuers are required to back their crypto tokens with safe assets like Treasury bills, indirectly boosting the purchase of Treasury bills. The Treasury Department's increase in Treasury bill issuance this time not only meets current financing needs but also aims to rebuild the cash buffer that was depleted due to debt ceiling issues. The Treasury Department announced on July 30 that short-term Treasury bill supply will continue to grow marginally in the near future and may be further expanded in October. It is worth noting that Treasury Secretary Mnuchin has no intention of expanding the issuance of long-term Treasury bonds in the near future. He had previously stated a month ago that current federal funds rates are too high and the cost of issuing long-term debt is too high, making it unattractive. Trump also stated at the end of July, "I have instructed the team not to issue debt with a maturity exceeding nine months." Interest in long-term Treasury bonds is still uncertain. The auction of the 10-year Treasury bonds on Wednesday will provide some clues, while the reaction to the auction of the 3-year bonds on Tuesday was relatively tepid. Citigroup analyst Jason Williams has postponed the expectation of an increase in long-term debt issuance from May 2026 to November, and J.P. Morgan's Jay Barry has pushed back the originally scheduled date of February 2025 to May. Meanwhile, gold, as a safe haven asset during geopolitical risks and market turmoil, has performed strongly this year, with a nearly 30% increase from the beginning of the year. Against the backdrop of trade tensions, wars, and high market uncertainty, the price of gold reached a historical high of $3,500 per ounce in April this year. Bank of America predicts that with growing concerns about the U.S. debt level, there is still room for gold prices to rise. The bank forecasts that the price of gold could break through $4,000 per ounce in the coming months. The continuous implementation of large fiscal stimulus packages by the U.S. government has led to a surge in deficits, prompting investors to question the reserve currency status of the U.S. dollar. In its report, Bank of America pointed out, "If the fiscal deficit remains high, coupled with market volatility, it may attract more funds into gold." The bank also specifically mentioned that global central banks are gradually reducing their holdings of U.S. dollars and U.S. bonds in favor of increasing their gold reserves. Data shows that the total amount of gold held by central banks around the world currently amounts to 18% of the total U.S. public debt, compared to only 13% ten years ago. The latest survey by the World Gold Council also shows that most central banks intend to continue increasing their gold allocations in the next 12 months and reduce their dependence on U.S. dollar assets. These signs indicate that amid a surge in U.S. bond supply and doubts about fiscal sustainability, gold is becoming a new safe haven for global funds.