J.P. Morgan strategists wrote, “Short-term US debt valuations are unlikely to strengthen significantly next year. With a sharp ramp-up in supply in 2027, the pressure may become more obvious during the supply concentration phase; the money market needs to absorb large amounts of short-term US debt supply when demand growth may not be as fast as in previous years.” Strategists warn that weakening short-term US bond prices may spill over into the financing market, especially if money market funds significantly reduce repurchase market allocations to accommodate more short-term US bonds, or if the financing market becomes more sensitive to short-term US bond settlement dates. The strategist said that the debt ceiling dynamic may come into effect next spring, and the Ministry of Finance may also keep general account balances low, thus making the picture of supply and demand in the financing market more blurred.

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