According to PANews, UBS previously anticipated that the rapid expansion phase of short-term U.S. Treasury debt as a proportion of circulating debt had concluded. However, the GENIUS Act could potentially initiate a new growth phase. The act mandates that stablecoin issuers maintain 100% reserve backing with short-term, highly liquid, and high-quality assets. Approved reserve assets include U.S. dollar cash, short-term U.S. Treasuries, deposits at insured depository institutions, and short-term Treasury repurchase agreements.
Following the resolution of the debt ceiling issue and the significant expansion of government money market funds, the short-term U.S. Treasury market currently has ample capacity to absorb additional demand. If the GENIUS Act stimulates increased demand for short-term Treasuries, the U.S. Treasury Department may slightly delay the expansion of interest-bearing Treasury issuance and have more flexibility to repurchase older, less liquid bonds.
Regardless of these developments, UBS expects the Treasury Department to maintain a stable relative proportion between short-term Treasuries and interest-bearing Treasuries.