Net Treasury Bill Issuance

Think of it this way

It is like borrowing from a neighbor who has money stashed away, unused, under the mattress: they lend it to you, you spend it, and the same money as before keeps circulating in the neighborhood. The problem appears when that stash runs out, because then the neighbor can only lend to you by taking the money out of the account they use to pay their bills, and that is felt in the neighborhood.

What is Net Treasury Bill Issuance?

These are short-term debt issues (from 4 weeks to 1 year) minus what matures that day. A positive figure means the Treasury is borrowing more at short maturities; a negative one, that it is reducing short-term debt.

How to read Net Treasury Bill Issuance

Highly volatile daily bars. They offset each other over the week, so it is more useful to look at the 5- or 20-day moving average than at a single day's figure. Lag: none; the move and its effect happen on the same day.

What Net Treasury Bill Issuance means for the market

Here is the distinction that decides how much the same deficit hurts. Bills are bought by money market funds, and everything depends on where they get the money. AS LONG AS THERE IS A BALANCE IN THE RRP they take it from there, from money that was already out of circulation, and issuing bills barely touches bank reserves: it is the cheap half of the debt. WITH NO BALANCE IN THE RRP the fund has to take it from the banking system like any other buyer, and then bills and bonds compete for the same reserves. That cushion exceeded 2,500 billion at the end of 2022 and eventually emptied completely, so the same chart reads in opposite ways depending on which regime you are in: always check the RRP before judging a run of issuance.

Where the money flows

From money market funds to the Treasury, and everything depends on where the fund gets the money. For years it took it from the RRP: the Treasury issued 100 billion in bills, a money market fund paid for them with money it had parked, unused, at the Fed's window, and bank reserves did not even notice. When that cushion runs out, the same fund has to stop rolling over a deposit at a bank or sell something else to buy those bills, and the money leaves a real bank account. Same move on paper, different effect on liquidity.

What to watch in Net Treasury Bill Issuance

Watch the level of the RRP on its own chart, because it decides how this series should be read. With a high RRP, a run of bill issuance could be ignored. With the RRP at zero, that same run comes out of bank reserves and counts just like bond issuance.

Gray while the RRP could absorb them; in color when the money leaves the banking system.