Swelling deficits and weak investor appetite for long-term U.S. debt are pushing the Treasury Department to get more creative with how it borrows. Markets are thrilled—but the approach comes with risks. 

The Treasury has long embraced the mantra of “regular and predictable” debt sales to avoid creating market volatility as it finances the U.S. deficit. Recently, though, high interest rates have driven investors to eschew longer-term Treasurys. The government has had to adapt, cutting back this month on expected increases in long-term bonds and favoring more short-term debt.