**Treasury Borrowing Advisory Committee (TBAC) Quarterly Refunding Announcement**

The TBAC has released its quarterly refunding announcement, offering insight into the US Treasury’s debt issuance strategy. Market participants are closely monitoring the government’s funding plans as interest rates rise and fiscal deficits grow. The amount of debt issued, particularly at the long end of the yield curve, influences supply and demand dynamics of US Treasury yields, impacting market prices.

**Debt Issuance Projections**

The Treasury aims to reduce the Treasury General Account (TGA) from $886 billion to $700 billion between October and December 2024, 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 $277 billion increase in debt issuance over the next two quarters, with the decrease in the TGA balance accounting for $150 billion of this increase.

**Composition of Debt Issuance**

The composition of the debt to be issued remains critical. Treasury Secretary Janet Yellen has stated 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). The planned TGA drawdown and subsequent increase will necessitate a substantial rise in T-bill issuance.

**Forecasted Increase in T-Bill Issuance**

The Treasury forecasts an increase 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. However, with total Treasury debt above the upper limit of the target range at 22%, concerns remain about the Treasury’s ability to avoid surprising markets with changes in duration.

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