The battered bond market starts 2025 facing some difficult issues about debt

As if the bond rout in 2024 wasn't bad enough, fixed income investors face multiple challenges in the year ahead, including one under-the-radar worry about short term notes coming due.

Nearly $3 trillion of U.S. debt is expected to hit maturity in 2025, much of it of a short-term nature that the Treasury Department has been issuing in large amounts over the past few years.

With the government expected to try to lengthen the duration of that debt when it is time to roll it over, it could provide another headache should the market not be prepared to absorb what already is expected to be massive Treasury issuance as the U.S. finances a nearly $2 trillion budget deficit.

"If you assume that we're going to be running trillion-dollar-plus deficits beyond 2025 then eventually, cumulatively, that will overwhelm the T-bill issuance," Tom Tzitzouris, head of fixed income at Strategas Research Partners said Tuesday on CNBC's "Squawk Box."

Strategas estimates that there is $2 trillion in "excess" Treasury bills in the $28.2 trillion Treasury market now.

"Those are going to have to gradually be scooped and tossed out to the five-to-10-year portion of the curve majority, and that is probably a bigger concern for the market right now than the deficit next year," Tzitzouris said.

Normally, the Treasury Department likes to keep bill issuance to just over 20% of total debt. But that share has crept higher in recent years amid ongoing battles over the debt ceiling and budget and Treasury's need to raise immediate cash to keep the government operating.

In 2024, Treasury issuance totaled $26.7 trillion through November, an increase of 28.5% from 2023, according to the Securities Industry and Financial Markets Association.

Treasury Secretary Janet