U.S. Debt Ceiling “August Deadline” Looms — Treasury Begins Cutting Short-Term Bond Issuance

TradingKey - As the so-called “X-date” — the point at which the U.S. Treasury runs out of emergency measures to avoid default — draws closer, and with Trump’s tax cut and spending bill still stuck in a difficult legislative process, the U.S. government is beginning to tighten its belt: reducing short-term Treasury issuance.

On Tuesday, May 27, the U.S. Department of the Treasury announced its latest auction schedule for short-term debt:

• $75 billion in 4-week Treasury bills, down $10 billion from the previous auction.
• $65 billion in 8-week Treasury bills, also reduced by $10 billion.
• $60 billion in 17-week Treasury bills, unchanged from the prior auction.

This marks the first reduction since February 2025 in the issuance of 4-week and 8-week T-bills, potentially signaling the start of a broader de-risking strategy as the Treasury navigates the current debt ceiling constraints.

Economists expect that the U.S. Treasury may continue to reduce bond issuance over the coming weeks to preserve headroom for longer-term bond auctions in mid-June, when larger borrowing needs will arise.

Since the U.S. hit its statutory debt limit in January 2025, the Treasury has been relying on extraordinary measures to fund federal operations and avoid a potential default.

The Congressional Budget Office (CBO) previously warned that these emergency accounting tools would likely be exhausted by August, or possibly even earlier — as soon as late May — if borrowing needs exceed expectations.

U.S. Treasury Secretary Scott Bessent also noted that, after assessing cash inflows following the April tax season, the Treasury’s cash reserves and extraordinary measures could run dry during the August congressional recess. 

He urged Congress to resolve the debt ceiling issue by mid-July at the latest, to protect the full faith and credit of the United States.

As of May 21, the Treasury had approximately $67 billion in remaining emergency measures, excluding cash on hand.