• Newly Appointed Treasury Secretary Guides Crucial Debt Management Initiatives

  • Feb 6 2025
  • Length: 3 mins
  • Podcast

Newly Appointed Treasury Secretary Guides Crucial Debt Management Initiatives

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  • Summary

  • In the latest developments, the U.S. Department of the Treasury, under the guidance of the newly appointed Secretary, has been actively engaged in several key initiatives and discussions over the past few days.

    The Treasury Borrowing Advisory Committee (TBAC) recently met to discuss various aspects of Treasury financing and market conditions. The committee congratulated the new Secretary on their appointment and outlined the current economic backdrop, which includes robust growth and cooling, though still elevated, inflation. The committee noted that 2-year Treasury yields have remained relatively stable, while 10-year Treasury yields have increased by about 25 basis points since the last meeting in October 2024. The strong growth in the U.S., particularly compared to softer growth in other regions, has contributed to the rise in longer-term interest rates and the appreciation of the broad trade-weighted dollar[1].

    The TBAC reviewed Treasury's February 2025 Quarterly Refunding Presentation, which includes plans for significant Treasury security issuances. Over the February to April 2025 quarter, the Treasury will offer $125 billion of Treasury securities to refund approximately $106.2 billion of privately-held Treasury notes and bonds maturing on February 15, 2025. This includes a 3-year note for $58 billion, a 10-year note for $42 billion, and a 30-year bond for $25 billion. These auctions are scheduled to take place on February 11, 12, and 13, 2025, respectively[3].

    The committee also advised on the composition of Treasury marketable financing for the upcoming quarters, recommending the maintenance of nominal coupon and Floating Rate Note (FRN) auction sizes at current levels. Additionally, they suggested increasing all tenors of Treasury Inflation-Protected Securities (TIPS) by $1 billion this refunding quarter to maintain a stable share of TIPS as a percentage of total marketable debt outstanding[5].

    In terms of financing needs, the Treasury expects privately-held net marketable borrowing of $815 billion in the second quarter of FY 2025 (first quarter of CY 2025), with an assumed end-of-March cash balance of $850 billion. For the third quarter of FY 2025, the estimate is $123 billion, with a cash balance of $850 billion assumed at the end of June. These estimates are contingent on the enactment of a debt limit suspension or increase[1].

    The Treasury has also been using extraordinary measures to finance the government on a temporary basis since January 21, 2025, due to debt limit-related constraints. This has led to greater variability in benchmark bill issuance and significant usage of cash management bills (CMBs). The Treasury plans to transition the 6-week CMB to benchmark status, with the first benchmark 6-week bill auction scheduled for February 18, 2025[3].

    These actions and recommendations reflect the Treasury's ongoing efforts to manage the nation's debt and respond to evolving economic conditions, ensuring the stability and efficiency of the Treasury market.
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