The Treasury Borrowing Advisory Committee convened in a closed session at the Department of the Treasury on July 30, 2024. All members were present, along with Veronica Clark from Citigroup to assist the Committee Chair. Under Secretary for Domestic Finance Nellie Liang, Fiscal Assistant Secretary David Lebryk, Assistant Secretary for Financial Markets Josh Frost, Deputy Assistant Secretary for Federal Finance Brian Smith, Director of the Office of Debt Management Fred Pietrangeli, and Deputy Director of the Office of Debt Management Tom Katzenbach welcomed the Committee. Additional Treasury staff and Federal Reserve Bank of New York staff were also in attendance.
Director Pietrangeli reviewed year-over-year changes in receipts and outlays through Q3 FY2024. Receipts totaled $3.75 trillion during the first nine months of FY2024, an increase of $342 billion (10%) compared to the same period last year. This increase was primarily due to higher non-withheld and corporate taxes following an extension of several federal tax deadlines from FY2023 into FY2024. Outlays totaled $5.02 trillion through Q3 FY2024, an increase of $217 billion (5%) compared to the same period last year, largely attributable to higher gross interest on public debt as well as cost-of-living adjustments to Social Security and other transfer payments.
Pietrangeli then discussed privately-held net marketable borrowing projections. Primary dealer estimates for the next three fiscal years were somewhat higher than previous estimates, with a median aggregate estimate for FY2024-FY2026 approximately $397 billion higher than last quarter. Dealers voiced uncertainty regarding borrowing needs in FY2025 and FY2026 due to factors such as monetary and fiscal policy paths, SOMA redemptions duration, and economic outlook.
Under Secretary Liang provided a brief update on debt management and other Treasury priorities and thanked Mohit Mittal for his willingness to serve as Vice Chair of the Committee. She also expressed gratitude towards Greg Davis and Gil Holmes for their service.
Deputy Director Katzenbach reviewed primary dealers’ expectations for coupon issuance. All primary dealers expected nominal coupon and floating rate note (FRN) issuance to remain unchanged at the August refunding. Looking ahead, while dealers anticipated that nominal coupon and FRN auction sizes would remain unchanged through 2024's end, some thought modest increases might be needed in 2025 or 2026 due to uncertainty about borrowing needs and potential debt limit impasses.
Debt Manager Banerjee summarized primary dealers’ views on FINRA’s publication impact regarding transaction data for on-the-run nominal coupons at day-end (and historical uncapped transactions data). Primary dealers estimated minimal impact on liquidity conditions citing pre-existing price transparency.
Debt Manager Chisholm reviewed primary dealers’ views on liquidity support buyback operations' impact thus far. Dealers characterized buybacks as moderately supportive but suggested that robust off-the-run liquidity meant broader liquidity conditions' effect was hard to measure.
Chisholm then detailed nine liquidity support buyback operations conducted between May 29 and July 24 comparing par offered against par accepted by Treasury in each operation.
The Committee discussed considerations for Treasury bill issuance focusing on financing costs over time, regular coupon issuance preservation via bills use, market structure/demand impacts, and debt maturity profile impacts.
After lunch adjournment at noon until reconvening at 1:15 p.m., discussions resumed focusing on demand shifts for Treasuries by key investor types noting increased price sensitivity among investors impacting both domestic/foreign demand outlooks influenced by regulatory factors affecting bank/money market fund demands alongside monetary policy's currency hedging cost impacts.
Finally concluding recommendations advised maintaining current nominal coupon/FRN auction sizes with gradual TIPS auction size increases suggested across upcoming quarters before final adjournment at 2:20 p.m., followed by a summary presentation/report discussion with Deputy Secretary Adeyemo upon reconvening at 5:00 p.m., adjourning finally at 5:30 p.m.
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Brian Smith
Deputy Assistant Secretary for Federal Finance
United States Department of the Treasury
July 30, 2024
Certified by:
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Deirdre Dunn, Chair
Treasury Borrowing Advisory Committee
July 30, 2024
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