The Committee convened in a closed session at the Department of the Treasury at 9:00 a.m. All members were present. Allison Weed from Citigroup was also present to assist the Committee Chair. Acting Assistant Secretary for Financial Markets 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. Other members of Treasury staff present were Chris Cameron, Nicholas Chisholm, Dave Chung, Gabriella Csepe, Matt Garber, Liang Jensen, Shahnewaz Khan, Chris Kubeluis, Kyle Lee, Hunter McMaster, Andrew Rittenhouse, Gavin Ross, Joshua Stachura, Renee Tang, and Tyler Williams. Federal Reserve Bank of New York staff members Oliver Giannotti, Ellen Correia Golay, and Kyle Watson were also present.
Director Pietrangeli highlighted changes in receipts and outlays through Q2 FY2025. Receipts totaled $2.260 trillion, an increase of $72 billion (3%) compared to the same period last year, primarily due to 7% growth in withheld taxes, which reflects wage and employment growth. Outlays totaled $3.567 trillion, an increase of $315 billion (10%) compared to the same period last year, which was largely due to the impact of higher interest costs, inflation adjustments to transfer payments, and increases in defense expenditures. It was noted that, after adjusting for the effects of FY2023 and FY2024 tax deferrals and assorted calendar impacts on outlays, both receipts and outlays would have been 7% higher year-over-year.
Pietrangeli then turned to privately-held net marketable borrowing projections, noting that the latest estimates from the primary dealers indicated that current auction sizes appear to leave Treasury well positioned for expected borrowing needs through FY2025, but larger gaps are forecast in FY2026 and beyond. He also indicated that dealers voiced uncertainty regarding borrowing needs, citing the path of monetary and fiscal policy, as well as the economic outlook.
Deputy Director Katzenbach reviewed primary dealers’ expectations for coupon issuance, noting the unanimous expectation that nominal coupon issuance would remain unchanged at the May refunding. Looking ahead, primary dealers’ expectations for the next set of nominal coupon auction size increases shifted more definitively into 2026, from previous expectations for a late-2025 or early-2026 increase. With respect to Treasury Inflation-Protected Securities (TIPS), most dealers anticipated that the size of the May 10-year TIPS reopening would remain unchanged, but that the size of the June 5-year TIPS reopening and the July 10-year TIPS new issue would each increase by $1 billion.
Debt Manager Stachura then summarized primary dealers’ views on potential changes to the auction schedule for the 20-year bond. They highlighted the unique aspects of the current 20-year bond auction calendar and longer-than-typical when-issued period, especially the post-auction settlement period. Dealers noted that there could be benefits to shortening the post-auction settlement period to address persistent repo specialness and elevated prevalence of settlement fails. They suggested considering an earlier settlement date but recommended against moving the auction week. Dealers agreed that further exploration of potential adjustments to the auction schedule is justified.
Debt Manager Chisholm proceeded to review primary dealers’ views on the potential demand for Treasury securities as a reserve asset for stablecoins. Dealers suggested that recent stablecoin growth and the potential for legislation to provide regulatory clarity could drive an increase in stablecoin adoption. Given that stablecoin providers already have significant holdings of Treasury securities and may be required to hold assets that include Treasury bills under proposed legislation, dealers agreed that the digital asset space was important to monitor on an ongoing basis as a potential source of Treasury demand.
The Committee then discussed recent market developments. Committee members summarized the significant market events that transpired in early April, noting key drivers and effects across financial markets. The Committee highlighted deleveraging activity by some investors, changes to typical asset class correlations, and the large moves in swap spreads; in comparison, the Treasury cash-futures basis was fairly stable during this period. Committee members agreed that trading conditions in the Treasury cash market and financing conditions in the repo market generally remained orderly despite heightened volatility and record trading volumes. Members emphasized the importance of maintaining a stable and functioning repo market, particularly in times of stress.
The Committee then turned to the first charge, which addressed the effects of the debt limit on financial markets. The presenter observed that the current debt limit process likely increases debt servicing costs, volatility in financial markets, and risks for Treasury and market participants due, in part, to large fluctuations in the TGA balance and Treasury bill issuance. The presenter also noted that the debt limit has not successfully promoted fiscal responsibility but has harmed the United States’ credit rating and could affect the country’s reserve asset status. The presenter reviewed alternative debt limit approaches from a recent GAO report, as well as the potential benefits and drawbacks of each. The Committee expressed that its preferred option would be for Congress to delegate broad authority to the Administration to borrow as necessary to fund government obligations.
The Committee then discussed the second charge addressing the terminal effects of interest-bearing stablecoins on demand for Treasuries, USD hegemony, the expansion of the dollar-backed payment stablecoins, and potential effects for insured depository institutions. The presenting member began by reviewing current stablecoin market dynamics and the potential for growth in adoption, noting that the current legislation in Congress provides for a prohibition on yield to holders. There was robust discussion concerning the potential implications of interest bearing stablecoins versus non-interest bearing stablecoins, and the extent to which growth in stablecoins would result in net new demand for Treasury securities rather than a reallocation of demand from banks and money market mutual funds. The Committee also discussed the potential benefits and risks for the financial system of increased adoption of stablecoins.
The Committee adjourned at 11:50 a.m. for lunch.
The Committee reconvened at 1:20 p.m.
The Committee turned to its financing recommendation for the upcoming quarters and recommended that Treasury maintain nominal coupon and FRN auction sizes at current levels. Looking further ahead, some Committee members suggested that Treasury could modestly relax its forward guidance regarding the path of auction sizes. With respect to TIPS, the Committee recommended that Treasury continue with $1 billion increases to offering sizes at the 5- and 10-year tenors and suggested potential additional analysis regarding demand for TIPS.
The Committee adjourned at 2:10 p.m.
The Committee reconvened at 2:30 p.m.
Finally, the Chair summarized key elements of the Committee report for Secretary Bessent and followed with a brief discussion of recent market developments.
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Brian Smith
Acting Assistant Secretary for Financial Markets
United States Department of the Treasury
April 29, 2025
Certified by:
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Deirdre Dunn, Chair
Treasury Borrowing Advisory Committee
April 29, 2025
Treasury Borrowing Advisory Committee Quarterly Meeting
Committee Charge – April 29, 2025
Fiscal Outlook
Taking into consideration Treasury's short, intermediate, and long-term financing requirements, as well as the variability in financing needs from quarter to quarter, what changes, if any, do you recommend to Treasury issuance? Please also provide perspectives regarding market expectations for Treasury issuance, the effects of changes in SOMA holdings, the evolution of Treasury holdings by different types of investors, as well as auction calendar construction.
Debt Limit
Congress has acted to raise or suspend the statutory debt limit 78 times since 1960. Concerns about the debt limit (and the process involved in raising or suspending it) have increased Treasury’s borrowing costs, disrupted financial markets, and resulted in downgrades to the US sovereign credit rating. In December 2024, GAO published a report highlighting the severe consequences of a potential default and reiterating three options to improve the debt limit process: (1) Linking the debt limit to the budget process; (2) Providing the administration with the authority to increase the debt limit, subject to a congressional motion of disapproval; or (3) abolishing the debt limit and allowing Treasury to borrow amounts necessary for expenditures authorized by law. We would like the Committee to comment on the effect of the debt limit (and the process involved in raising or suspending it) on financial markets. Please also consider the options highlighted by GAO and their potential benefits and costs.
Stablecoins
With the growth of the cryptocurrency and digital asset economy has come the expansion of the “stablecoin” market in the United States and abroad. As this asset class continues to grow, the distinctions between money funds and payment stablecoins has continued to converge. Some stablecoins are moving towards paying interest, money market funds are exploring tokenization, and Congress is considering explicitly defining what constitutes a collateralized dollar-backed payment stablecoin. Please articulate the terminal effects of interest-bearing stablecoins from a perspective of Treasury demand, USD hegemony, the expansion of dollar-backed payment stablecoins, and potential effects for insured depository institutions. Further, do tokenized money funds present a risk should they be allowed to compete with other payment or settlement instruments?
Financing this Quarter
We would like the Committee’s advice on the following:
- The composition of Treasury notes and bonds to refund approximately $94.2 billion of privately-held notes maturing on May 15, 2025.
- The composition of Treasury marketable financing for the remainder of the April-June 2025 quarter.
- The composition of Treasury marketable financing for the July-September 2025 quarter.