**Treasury Borrowing Advisory Committee Releases Quarterly Refunding Announcement**
The Treasury Borrowing Advisory Committee (TBAC) has released its quarterly refunding announcement (QRA), advising the Treasury on debt issuance strategy for the upcoming quarter amidst rising fiscal deficits and interest rates above zero. Market participants closely monitor the government’s funding plans, as the amount of debt issued significantly influences US Treasury yields and market prices.
The Treasury’s QRA, the last before the upcoming election, projects debt issuance for the next two quarters. For October to December 2024, the Treasury aims to reduce the Treasury General Account (TGA) from $886 billion to $700 billion with $546 billion in net issuance. For January to March 2025, the target TGA balance is $850 billion with expected net borrowing of $823 billion, representing a $277 billion increase in debt issuance over the next two quarters.
The composition of the debt to be issued is a critical aspect of the QRA. Treasury Secretary Janet Yellen indicates no changes to the long-duration issuance composition in the coming quarters, meaning the dollar amount of issuance for maturities longer than one year will remain constant. As a result, increased borrowing needs will be met by issuing more short-term debt, specifically Treasury bills (T-bills).
The Treasury forecasts an increase in the proportion of total net issuance that is T-bills, from 13% to 45%, significantly higher than the long-term average of 15% to 20%. This increase is expected to be reversed in the second quarter of 2025 when tax receipts reduce the need for T-bill issuance. However, with total Treasury debt already above the upper limit of their target range at 22%, concerns arise about how long the Treasury can avoid surprising markets with changes in duration.
