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Treasury Oversupply Keeps Borrowing Costs Elevated

Businesses with floating-rate or refinancing debt should expect Treasury-linked rates to stay near current levels through the mid-term elections.

Updated on Nov. 1, 2026 in Economic Policy

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The Treasury's growing supply of government debt, now estimated at $304 billion in excess, is keeping US borrowing costs elevated through the mid-term elections, according to a State Bank of India analysis. AI Illustration. Upload story photo >

A State Bank of India (SBI) Ecowrap assessment projects the 10-year US Treasury yield could settle around 4.75 per cent, from a current level near 4.9 per cent. The report estimates a $304 billion excess supply of US Treasuries, tied to a 6.15 per cent fiscal deficit, and frames it as a pressure point for debt-dependent borrowers and the bond market.

Why it matters

The gap between government securities supply and investor absorption capacity is widening as fiscal deficits grow, which pushes up the cost of government borrowing and benchmarks that feed into business loan and financing rates. The SBI analysis points to a 2015 mismatch of about $140 billion when the deficit was 2.5 per cent of GDP, showing how sharply the imbalance has grown.

The SBI assessment estimates a $304 billion excess supply of US Treasuries at a 6.15 per cent fiscal deficit, up from roughly $140 billion in 2015 when the deficit was 2.5 per cent of GDP. The 10-year yield is projected near 4.75 per cent, from around 4.9 per cent today, and the report notes unresolved timing around potential US fiscal measures and the mid-term elections.

The players

State Bank of India (SBI)

India's largest commercial bank, whose Ecowrap research unit publishes macroeconomic and bond-market analysis for investors and borrowers.

US Treasury Department

The federal agency that issues US government debt and manages the borrowing programme that determines Treasury supply to the market.

The details

The SBI report measures excess supply by comparing the volume of government securities being issued against the capacity of investors to absorb them. As deficits widen, more debt must be sold into a market that may not take it at prior prices, so yields tend to rise to attract buyers. The report places most of the mismatch in longer maturities, with about $108 billion in securities above 10 years and about $96 billion in the 1-5 year segment. India offers a contrast: the report estimates an excess supply of Rs 1.52 lakh crore there, and the government reduced its gross borrowing requirement by Rs 1.23 lakh crores through bond switches and buybacks, a tool the report highlights for managing supply.

Timeline

  1. November 9: potential post-date for US government fiscal measures that could move yields toward 4.75 per cent.

  2. Mid-term elections: a short-term rise to 5.25-5.35 per cent is not ruled out around the vote, which could deliver a verdict favouring Democrats.

Market Landscape

The SBI assessment places the current US supply-absorption gap against its 2015 benchmark of about $140 billion, when the deficit stood at 2.5 per cent of GDP. The comparison with India, where the report estimates Rs 1.52 lakh crore of excess supply and a 250 bps spread between 10-year yields, frames US Treasury pressure within a wider emerging-market bond context.

Businesses that rely on floating-rate debt or refinance term loans should model scenarios in which Treasury-linked benchmarks stay near 4.9 per cent or rise toward 5.35 per cent around the mid-term elections. Finance teams should track the November 9 window for any fiscal measures and review how sensitive their borrowing costs are to a move in the 10-year yield.

The takeaway

Operators should treat Treasury yields as a leading indicator for their own borrowing costs and build a rate-sensitivity check into the next quarter's cash-flow forecast. Watch the post-November 9 fiscal signals and the mid-term election outcome, and consult a qualified accountant or financial adviser before changing debt structure in response.

What happens next

The SBI analysis flags November 9 as the earliest point at which meaningful US fiscal measures could move the 10-year yield toward 4.75 per cent, and the mid-term elections as a near-term window in which a short-term rise to 5.25-5.35 per cent is not ruled out.

Further reading

For the policy backdrop behind these debt and deficit pressures, see the Economic Policy section.