US Treasury Borrowing Plan: Increased Debt Issuance and Shift to Short-Term Debt

The Treasury Borrowing Advisory Committee (TBAC) has released its quarterly refunding announcement (QRA), outlining the US government’s debt issuance strategy for the next two quarters. The plan aims to reduce the Treasury General Account (TGA) from $886 billion to $700 billion between October and December 2024, followed by an increase to $850 billion between January and March 2025.

To achieve this, the Treasury plans to issue $546 billion in net issuance in the fourth quarter of 2024 and $823 billion in the first quarter of 2025, totaling an additional $277 billion. The decrease in the TGA balance accounts for $150 billion of this increase.

The composition of the debt to be issued remains unchanged, with no plans to alter the long-duration issuance composition. As a result, the increased borrowing needs will be met by issuing more short-term debt, specifically Treasury bills (T-bills). The Treasury forecasts a significant rise in T-bill issuance, with T-bills expected to account for 45% of total net issuance, up from 13%.

Historically, the Treasury targets a long-term average of 15% to 20% of total debt being T-bills. The current 45% weighting is likely an outlier, 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 the target range at 22%, there are concerns about the sustainability of the current borrowing plan.

Key statistics from the QRA include:

* $546 billion in net issuance planned for the fourth quarter of 2024 * $823 billion in net issuance planned for the first quarter of 2025 * TGA balance to decrease from $886 billion to $700 billion and then increase to $850 billion * T-bills expected to account for 45% of total net issuance * Total Treasury debt above the upper limit of the target range at 22%

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