The Committee convened in a closed session at the Department of the Treasury at 10:45 a.m. All members except Chris Leonard were present. Jim McCormick from Citigroup was also present to assist the Committee Chair. Counselor to the Secretary Hunter McMaster, 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. Other members of Treasury staff present were Abigail Brown, Chris Cameron, Dave Chung, Gabriella Csepe, Robert Dunsky, Ethan Fallang, Gary Grippo, Townes Holland, Liang Jensen, Gavin Ross, Alessio Saretto, Joshua Stachura, Nick Steele, and Renee Tang. Federal Reserve Bank of New York staff members Ellen Correia Golay, Annelise Escher, and Luis Gonzalez were also present.
Deputy Assistant Secretary Smith opened the meeting by expressing his appreciation to Deirdre Dunn for her service to the Committee, including as Chair for the last three years, and thanking Vice Chair Jason Granet for taking on the role of Chair starting at the August 2026 Committee meeting. He also welcomed Russell Brownback and Rick Chan as the newest members of the Committee and summarized recent debt management developments.
Director of the Office of Fiscal Projections Steele highlighted changes in receipts and outlays through Q2 FY2026. Within receipts, Steele emphasized a 272% (or $128 billion) increase in customs deposits reflecting higher tariff revenue, as well as growth in both withheld (+$80 billion) and non-withheld (+$78 billion) taxes. In terms of outlays, Steele noted that the largest increase occurred at the Department of Health and Human Services, which rose by 7% (or $59 billion), due to increased Medicare and Medicaid spending. Meanwhile, a group of other outlays fell by 17% (or $84 billion), primarily due to a reduction in disbursements by the Environmental Protection Agency and the Federal Emergency Management Agency, as well as lower Department of Education outlays.
Director Pietrangeli then turned to deficit and privately-held net marketable borrowing projections, noting that the median primary dealer increased its aggregate FY2026-28 privately-held net marketable borrowing estimate by nearly $300 billion. He noted that, while current issuance sizes are adequate to cover expected borrowing needs for the remainder of FY2026, the median primary dealer forecast for privately-held net marketable borrowing implies a $1.3 trillion funding shortfall in FY2027-28 based on current coupon auction sizes and bill supply.
Debt Manager Jensen reviewed primary dealers’ expectations for coupon issuance. The consensus remains that current coupon auction sizes leave Treasury well-positioned to meet its projected financing needs through FY2026, with changes in Treasury bill supply likely being adequate to address any changes in financing needs. Dealers generally anticipate that nominal coupon auction sizes might next increase in early CY2027, and expect Treasury to modify its forward guidance several quarters ahead of such a change.
Senior Debt Manager Stachura next summarized primary dealers’ views on how changes in bank regulation are affecting investor demand and liquidity in the Treasury market. The recently modified Enhanced Supplementary Leverage Ratio (eSLR) and the bank capital changes proposed in March 2026 were overwhelmingly viewed as helpful to the Treasury market; dealers emphasized that eSLR had enabled greater intermediation, and the proposed changes to bank capital were expected to result in incremental additional demand for Treasury securities from depository institutions as well as unlock balance sheet space that would most likely be deployed to repo. Dealers also highlighted the transition to expanded central clearing as important for Treasury market functioning.
Deputy Director Katzenbach then reviewed primary dealers’ thoughts on whether Treasury should consider changing the stated maturity dates of floating rate notes (FRNs), or other Treasury securities, so that those securities always mature on business days. Dealers expressed a clear preference for prospectively applying such a change to FRNs. Several dealers cited shortcomings to the current product structure resulting from a desire by investors, particularly money market mutual funds, to avoid holding such securities for the period between the stated maturity date and the final payment date (the Jan-2026 FRN maturity being a recent example). However, dealers suggested that this is an idiosyncratic issue specific to FRNs and argued that the stated maturity dates for non-FRN coupon securities should remain unchanged.
The Committee then discussed the first charge, which addressed the expansion of central clearing in the Treasury securities market. The presenter reviewed key areas of progress by both the industry and regulators since the extension of the implementation deadlines and noted the recent increase in central clearing activity ahead of the regulatory deadlines. The presenter then highlighted recent requests for exemptions related to certain inter-affiliate and extraterritorial transactions as key outstanding issues to resolve. The presenter concluded that, although the industry has made steady progress, some operational and implementation challenges remain as the market transitions to expanded central clearing.
The Committee adjourned at 11:45 a.m. for lunch.
The Committee reconvened at 1:15 p.m.
The Committee next discussed the second charge, which evaluated whether Treasury should consider investing excess cash in the overnight Treasury repo market to generate investment returns while maintaining prudent risk management and avoiding market disruptions. After the presenter analyzed several illustrative investment strategies that Treasury could utilize, the Committee discussed the relative merits of each option and how each could help Treasury balance its various policy goals. Key design choices mentioned by Committee members include the time of day that Treasury deploys cash into the repo market, the specific market segment that Treasury would invest in (e.g., triparty, centrally cleared), and Treasury’s required return. The presenter stressed that the economic viability of investing in the repo market is dependent on the spread between the interest rate Treasury earns on repo investments and the interest rate the Federal Reserve pays on reserve balances (i.e., IORB). The Committee agreed that while there are potential economic returns from such investments, their size and economic viability depend on the market environment and monetary policy, and that additional study is warranted regarding operational and implementation considerations.
Finally, the Committee turned to its financing recommendation for the upcoming quarters and unanimously recommended that Treasury maintain nominal coupon, FRN, and TIPS auction sizes at current levels. The Committee continues to believe that increases in coupon issuance could be warranted in FY2027 and discussed potential changes to the forward guidance for Treasury to consider.
The Committee adjourned at 2:50 p.m.
The Committee reconvened at 3:00 p.m.
The Chair summarized key elements of the Committee report for Secretary Bessent and followed with a discussion of recent market developments. Under Secretary for Domestic Finance Jonathan McKernan also attended this portion of the meeting.
The Committee adjourned at 3:45 p.m.
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Brian Smith
Deputy Assistant Secretary for Federal Finance
United States Department of the Treasury
May 5, 2026
Certified by:
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Deirdre Dunn, Chair
Treasury Borrowing Advisory Committee
May 5, 2026
Treasury Borrowing Advisory Committee Quarterly Meeting
Committee Charge – May 5, 2026
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.
Central Clearing Implementation
In February 2025, the Committee discussed SEC rules intended to expand central clearing of Treasury security and repo transactions and associated market developments. Since that time, the SEC has extended implementation deadlines by one year and taken additional steps to clarify the rules and facilitate market implementation. The SEC has also approved two additional clearinghouses for Treasury securities. Please comment on the current state of market adoption of central clearing in the Treasury securities market and the readiness of market participants for the implementation deadlines in December 2026 (securities) and June 2027 (repo). What steps, if any, could the official sector take to support a smooth transition?
Treasury Investment in Repo
Since 2009, Treasury has held all or nearly all of its cash in the Treasury General Account (TGA) at the Federal Reserve. Due to Treasury’s cash balance policy (adopted in 2015), balances in the TGA have frequently exceeded $800 billion. Because a) Treasury’s cash balance policy is formulated as a minimum, b) Treasury’s week-ahead outflows vary significantly over time, especially in light of mid- and end-of-month security maturities, and c) Treasury changes bill auction sizes gradually, Treasury often holds balances in excess of its expected week-ahead outflows. Should Treasury consider investing excess cash in the overnight Treasury repo market in order to generate investment returns while maintaining prudent risk management and avoiding market disruptions? Please discuss the potential benefits and costs of such investments. What returns would Treasury reasonably expect to earn on such investments? If the amounts Treasury offered to invest varied significantly day by day, what effects would there be on counterparty decisions about repo transactions with Treasury and the repo market more generally?
Financing this Quarter
We would like the Committee’s advice on the following:
- The composition of Treasury notes to refund approximately $83.3 billion of privately-held notes maturing on May 15, 2026.
- The composition of Treasury marketable financing for the remainder of the April-June 2026 quarter.
- The composition of Treasury marketable financing for the July-September 2026 quarter.