UBS: Stablecoins will boost net demand for short-term U.S. Treasuries, and there is still room for short-term debt supply

PANews reported on July 22 that according to Zhitong Finance, UBS previously estimated that the rapid expansion phase of short-term US Treasury debt's proportion of circulating debt has passed. However, the "GENIUS Act" may bring a new round of growth. According to the act, stablecoin issuers must maintain 100% reserve support with short-term, highly liquid, and high-quality assets. Approved reserve assets include: US dollar cash, short-term US Treasuries, deposits in insured depository institutions, and short-term Treasury repurchase agreements. After resolving the debt ceiling issue and significant expansion of government money market funds, the short-term US Treasury market currently has ample absorption capacity. If the "GENIUS Act" stimulates more short-term Treasury demand, the US Treasury may slightly delay expanding the issuance of interest-bearing bonds and have more room to repurchase less liquid old bonds. In any case, UBS expects the Treasury will continue to maintain a stable relative proportion of short-term and interest-bearing bonds.