**Treasury Borrowing Advisory Committee (TBAC) Quarterly Refunding Announcement (QRA)**
The TBAC has released its quarterly refunding announcement, offering insights into the Treasury’s debt issuance strategy for the upcoming quarter. As interest rates rise and fiscal deficits increase, market participants are closely monitoring the government’s funding plans. The amount of debt issued, particularly at the long end of the yield curve, influences US Treasury yields and market prices.
**Projections for Debt Issuance**
The Treasury aims to reduce its General Account balance from $886 billion to $700 billion between October and December 2024, issuing $546 billion in net issuance. For January to March 2025, the target balance is $850 billion, with net borrowing expected to reach $823 billion. This represents a significant increase in debt issuance, totalling an additional $277 billion over the next two quarters.
**Composition of Debt**
Treasury Secretary Janet Yellen has indicated that there will be no changes to the long-duration issuance composition in the coming quarters. As a result, increases in borrowing needs will be met by issuing more short-term debt, specifically Treasury bills (T-bills). The planned Treasury General Account drawdown and subsequent increase will lead to a substantial rise in T-bill issuance.
**Increase in T-Bill Issuance**
The Treasury forecasts a rise in the proportion of total net issuance that is T-bills, from 13% to 45%. Historically, the Treasury targets a long-term average of 15% to 20% of total debt being T-bills. This 45% weighting is likely an outlier and is expected to be reversed in the second quarter of 2025 when tax receipts reduce the need for T-bill issuance.
**Concerns about Debt Composition**
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.
