Strategists at JPMorgan, including Jay Barry and Pankaj Vohra, said in a report that the scale of US Treasury bill issuance is expected to keep expanding, with the market needing to absorb a net supply of $991 billion in Treasury bills in 2027, making the key question whether demand can keep up with supply.
"We see some headwinds on this front," the strategists wrote. They expect the pace of growth in money market fund assets under management to be roughly in line with the larger inflows seen in 2024 or 2025, unless there is major market turmoil akin to the 2020 pandemic shock or the 2023 regional banking stress. Given that the recent pullback by foreign official investors is more tactical than structural, they still have room to resume a smoother trend of short-term Treasury purchases.
However, the strategists believe a similar scenario is unlikely in the stablecoin sector unless there is a cryptocurrency rally or further clarity in the regulatory environment. "A sharp reversal to more expensive Treasury bill valuations is unlikely next year, and pressure could be especially pronounced during the significant increase in supply in 2027, because the money market will need to absorb a large amount of Treasury bill supply, while as noted above, the demand base may grow more slowly than in previous years," the strategists wrote.
The strategists warned that lower Treasury bill valuations could also spill over into funding markets, especially if money market funds sharply reduce repo allocations to add Treasury bills, or if funding markets become more sensitive to Treasury bill settlement dates. The strategists said debt ceiling factors could begin to come into play next spring, when the US Treasury may push down its general account balance, making conditions in funding markets even harder to judge.
Over the past two months, growth in money market fund assets under management has stalled. Although the strategists expect a seasonal rebound over the remainder of 2026, they expect assets under management to grow only about 5% this year, compared with double-digit growth over the past two years.
In the four months through August, foreign investors reduced their holdings of short-term US Treasuries by about $145 billion, cutting the share held by foreign official investors to just 4.3%, the lowest since May 2024. Growth in stablecoins has also stalled this year. The scale of fiat-backed stablecoins has fluctuated between $265 billion and $280 billion, with overall Treasury bill holdings of $127 billion, accounting for only 2% of total Treasury bill holdings, down from $137 billion in December 2025.
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