Treasury Bills

Money-market mutual funds, not stablecoins, drove the Treasury’s summer borrowing surge, absorbing 85% of new bill issuance in July and August. Stablecoins remain material holders of short-term government debt at nearly $200 billion, but their reserve structures channel demand through the same money funds that now dominate marginal Treasury supply.

• Money-market mutual funds absorbed approximately 85% of more than $550 billion in net Treasury bill supply issued during July and August 2026.
• Stablecoin issuers hold nearly $200 billion in Treasury bills and close-to-maturity government securities, according to Treasury Department data.
• Circle’s USDC reserves were 84% invested in a Rule 2a-7 government money-market fund as of June 30, showing institutional stablecoin demand channels through traditional cash managers.

• 85% of July-August Treasury bill supply absorbed by money funds
• $200B in Treasury holdings by stablecoin issuers
• $550B net bill supply growth in two months

Deputy Treasury Secretary Francis Brooke revealed in remarks delivered September 22 (September 22) that traditional money-market funds, not digital assets, seized the lion’s share of the government’s latest borrowing wave. The Treasury Department said net bill supply grew by more than $550 billion in July and August, an 8% increase in two months, with money funds purchasing approximately 85% of that additional issuance. Stablecoin holders remain significant Treasury investors, sitting on nearly $200 billion in bills and other short-dated securities, yet these figures measure different things: money funds’ buying during a specific two-month window versus stablecoins’ stock of holdings at an unspecified date.

Circle’s USDC reserve fund holds more Treasury repos than direct bills

The overlap between stablecoin reserves and money-fund portfolios reveals how institutional demand flows through traditional vehicles. Circle disclosed in its second-quarter filing that approximately 84% of USDC reserves were invested in the Circle Reserve Fund, a Rule 2a-7 government money-market fund, as of June 30 (June 30, 2026). The fund’s annual shareholder report showed that as of April 30 (April 30, 2026), the portfolio held $19.111 billion in direct Treasury obligations but $46.998 billion in repurchase agreements collateralized by Treasuries, meaning more than two-thirds of Treasury exposure came through repos rather than direct bill ownership.

This structure matters for institutional buyers evaluating stablecoin risk and Treasury financing channels.

The repo-heavy allocation shows that even as stablecoins became significant Treasury holders, they funneled demand through money-fund and repo channels that traditional cash managers already dominated.

A single issuer’s allocation does not characterize the entire stablecoin market, but Circle’s disclosure demonstrates the accounting overlap that can obscure which buyer class, money funds or digital assets, actually absorbed marginal supply.

Federal Reserve and foreign demand added to money funds’ core Treasury appetite

Beyond money funds and stablecoins, the Federal Reserve and foreign residents supplied additional demand for short-term government debt in 2026. The Fed purchased more than $300 billion in Treasury bills through reserve-management operations and reinvestment of principal payments from agency mortgage-backed securities, according to Treasury data current through September 22 (September 22, 2026). The July monetary policy report recorded nearly $250 billion of bill purchases through July 1, comprising about $160 billion from reserve-management operations and roughly $90 billion from agency MBS principal reinvestment.

The Fed’s balance sheet corroborated the scale of expansion.

Bill holdings grew from $233.592 billion on December 31, 2025 to $550.482 billion on September 16, 2026, with the earlier figure reported in the January 2 H.4.1 release and the more recent figure reported in the September 17 H.4.1 release, showing how quickly short-dated securities became a larger portfolio component. Foreign residents increased their bill holdings by $38.8 billion in July alone, reversing three consecutive monthly declines totaling $92.5 billion from April through June. The rebound showed overseas buyers returning, though Treasury cautioned that custody-based data can obscure beneficial ownership when securities flow through third-country intermediaries.

Stablecoin growth remains conditional on regulatory clarity, not yet established as marginal buyer

Treasury presented stablecoin demand as a source of potential future growth contingent on regulatory implementation. Brooke said issuers may expand and increase Treasury holdings as rules implementing the GENIUS Act are finalized, framing the digital-asset channel as an option for future demand rather than explaining the July-August supply absorption.

That conditional language leaves material questions open: whether future stablecoin regulation will require segregated Treasury holdings outside money-fund structures, whether issuers will materially increase reserve sizes, and how much of existing stablecoin Treasury exposure already channels through money funds that Treasury credited with absorbing the surge.

The regulatory channel has not yet become a quantified source of marginal demand.

The data separate stablecoin potential from established incremental buying. Money funds dominated Treasury’s account of the July-August supply increase. The Fed supplied substantial year-to-date secondary-market demand, and foreign holdings rebounded in July.

Stablecoin issuers sat inside that market as large holders whose reserve structures, exemplified by Circle’s approach, channeled demand through the same government money-market funds Treasury identified as the primary marginal buyer.

The CCS read. Institutional crypto funds and stablecoin reserve managers should watch whether the GENIUS Act’s final rules permit or mandate direct Treasury ownership outside money-fund vehicles, or whether regulatory approval simply formalizes the existing practice of routing stablecoin reserves through traditional cash funds. This distinction determines whether stablecoins become an independent source of Treasury demand or remain a pass-through for money-fund allocations.

Treasury’s next opportunity to clarify stablecoin demand comes when the GENIUS Act regulations are finalized. Until then, the July-August supply surge belongs to money-market funds, leaving open whether stablecoins will eventually command their own buyer classification or remain embedded inside institutional fixed-income portfolios.