**Treasury Borrowing Advisory Committee Announces Quarterly Refunding Plans**
The Treasury Borrowing Advisory Committee (TBAC) has released its quarterly refunding announcement, providing insight into the government’s debt issuance strategy for the upcoming quarter. The announcement has garnered significant attention due to the current fiscal environment, with interest rates above zero and rising fiscal deficits.
**Debt Issuance Projections**
For the period from October to December 2024, the Treasury aims to reduce the Treasury General Account (TGA) from $886 billion to $700 billion, with plans to issue $546 billion in net issuance. For January to March 2025, the target TGA balance is set at $850 billion, with net borrowing expected to reach $823 billion. This represents a significant increase in debt issuance, totaling an additional $277 billion over the next two quarters.
**Debt Composition**
Treasury Secretary Janet Yellen has indicated that there will be no changes to the long-duration issuance composition in the coming quarters. This means that the dollar amount of issuance for maturities longer than one year will remain constant. Consequently, any increase in borrowing needs will be met by issuing more short-term debt, specifically Treasury bills (T-bills).
**Treasury Bill Issuance**
The Treasury is forecasting an increase in the proportion of total net issuance that is T-bills, from 13% to 45%. This is significantly higher than the historical target of 15-20%. The increase is expected to be necessary to fund the Treasury due to the planned TGA drawdown to $700 billion and subsequent increase to $850 billion.
**Implications**
The substantial rise in T-bill issuance is likely to be reversed in the second quarter of 2025 when tax receipts reduce the need for T-bill issuance. However, with total Treasury debt above the upper limit of their target range at 22%, there is concern about how long the Treasury can avoid surprising markets with changes in duration.