Treasury Borrowing Advisory Committee Releases Quarterly Refunding Announcement
The Treasury Borrowing Advisory Committee (TBAC) has issued its quarterly refunding announcement (QRA), which outlines the government’s debt issuance strategy for the upcoming quarter. The QRA is being closely monitored due to rising fiscal deficits and interest rates.
Debt Issuance Projections for the Next Two Quarters
The Treasury has provided projections for debt issuance for the next two quarters. 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. The decrease in the TGA balance accounts for $150 billion of this increase.
Changes in Debt Composition
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, any increase in borrowing needs will be met by issuing more short-term debt, specifically Treasury bills (T-bills). Due to the planned TGA drawdown to $700 billion and subsequent increase to $850 billion, a substantial rise in T-bill issuance will be necessary to fund the Treasury.
Increase in Short-Term Debt
The Treasury is forecasting an increase in the proportion of total net issuance that is T-bills, from 13% to 45%. This is a significant deviation from the historical target range of 15% to 20%. The 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 Long-Term Debt
With total Treasury debt already 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.