Minutes of the Meeting of the Treasury Borrowing Advisory Committee November 4, 2025

The Committee convened in a closed session at the Department of the Treasury at 10:45 a.m. All members except Gagan Singh were present. Allison Weed from Citigroup was also present to assist the Committee Chair. Director of Policy & Planning 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, Nicholas Chisholm, Dave Chung, Gabriella Csepe, Gary Grippo, Liang Jensen, Shahnewaz Khan, Gavin Ross, Joshua Stachura, Nick Steele, and Renee Tang. Federal Reserve Bank of New York staff members Ellen Correia Golay, Peggy Kauh, and Kyle Watson were also present.

Deputy Assistant Secretary Smith opened the meeting by thanking outgoing Vice Chair Mohit Mittal for his service to the Committee and summarizing recent debt management developments. Acknowledging the current lapse in appropriations, Smith also noted that Appendix B to Treasury's Uniform Offering Circular addresses the index contingencies for Treasury Inflation Protected Securities (TIPS) related to availability of CPI.

Director of the Office of Fiscal Projections Steele highlighted changes in receipts and outlays during FY2025. Receipts totaled $5.235 trillion, an increase of $317 billion (6%) compared to last year, primarily due to 6% growth in withheld taxes, which reflects wage and employment growth, and a 142% increase in customs deposits, which reflects higher tariff receipts. Outlays totaled $7.01 trillion, an increase of $275 billion (4%) compared to last year, which was largely due to the impact of higher interest costs and inflation adjustments to transfer payments. It was noted that receipts would have been 9% higher year-over-year after adjusting for the effects of FY2023 and FY2024 tax deferrals. After adjusting for assorted calendar impacts, outlays would have been 3% higher year-over-year.

Director Pietrangeli then turned to privately-held net marketable borrowing projections, noting that the latest estimates from the primary dealers suggest that current auction sizes appear to leave Treasury well positioned for FY2026, but larger gaps are forecasted in FY2027 and FY2028. Pietrangeli also noted that Federal Reserve reinvestments of principal payments from agency securities into Treasury bills will result in a reduction of the financing gap.

Debt Manager Chisholm then reviewed primary dealers' views on potential changes to the size and composition of the Federal Reserve's SOMA portfolio. The FOMC's October 29 decision to end redemptions of Treasury securities from the SOMA portfolio was broadly consistent with dealers' expectations. Primary dealers were also supportive of the FOMC's decision to reinvest principal payments from agency securities into Treasury bills, noting that the SOMA portfolio has proportionally fewer Treasury bills compared to the overall Treasury market composition. Finally, dealers acknowledged that there is uncertainty concerning when the Federal Reserve will conduct open market operations to increase the size of its balance sheet.

The Committee then discussed the recent tightening of funding market conditions. Although rates have moved higher, Committee members emphasized that the repo market for Treasury securities has remained orderly and has functioned reasonably. The Committee cited various factors affecting funding markets, including regulatory constraints, as well as the aggregate increase in Treasury bill issuance and the Treasury General Account (TGA) balance since the debt limit was raised in early July. More recently, TGA balances reached $1 trillion on October 30, further reducing reserve balances. The Committee acknowledged that this increase in the TGA was motivated by Treasury's adherence to its longstanding cash balance policy, and was consistent with the aggregate volume of Treasury securities maturing in late October as well as the concentrated net fiscal outflows that typically occur around month-end. Some Committee members noted that the Federal Reserve has tools to address sustained repo market pressure, if it proves necessary.

The Committee adjourned at 11:45 a.m. for lunch.

The Committee reconvened at 1:00 p.m.

Debt Manager Ross reviewed primary dealers' expectations for coupon issuance. The consensus among primary dealers was 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 financing gap. In FY2027 and FY2028, the median primary dealer forecasts increases in 2- to 7-year nominal coupon offering sizes, with the largest increases being in the 2- and 5-year notes. Projected increases in longer-dated nominal coupons, TIPS, and FRN offering sizes were smaller.

Debt Manager Stachura then summarized primary dealers' views on potential changes to the auction schedule for the 20-year bond and the importance of SOMA holdings for securities lending. Dealers reiterated that the substantial length of the when-issued period is a driving force in persistent repo specialness, and they expressed favorable views on shortening the time between auction and settlement for reopenings. Primary dealers also emphasized the importance of SOMA add-ons at auction and expressed confidence that maintaining the existing new-issue cycle would provide sufficient add-ons to support borrowing demand around reopenings. Treasury will take this feedback into account when evaluating implementation considerations and deciding whether to make changes to the 20-year auction schedule going forward.

The Committee then presented on considerations for optimal debt issuance. The presenting member reviewed the Committee's Optimal Debt Model (Model) and noted that, in recent years, higher debt levels, larger deficits, and higher term premia have led to higher and more volatile debt service costs. The presenter then reviewed the effects of different macroeconomic scenarios on the Model's output. The presenting member concluded that Treasury's current issuance mix is near the Model's efficient frontier. The presenting member outlined the features and limitations of the Model, and considered its application across several hypothetical economic scenarios. The presenter's analysis indicated that increasing issuance in intermediate tenors could reduce debt service cost volatility with limited additional cost in more adverse macroeconomic scenarios. The presenting member concluded by providing suggestions for potential model enhancements and alternative frameworks. It was noted that the Model is one of many useful inputs that Treasury should consider in its issuance decisions.

Finally, the Committee turned to its financing recommendation for the upcoming quarters and recommended that Treasury maintain nominal coupon and floating rate note (FRN) auction sizes at current levels. With respect to TIPS, the Committee recommended that Treasury increase the size of the December 5-year reopening by $1 billion, which would mirror the $1 billion increase to the October 5-year new issue, and leave the January 10-year new issue offering size unchanged. The Committee discussed considerations for Treasury regarding adjusting its forward guidance on nominal coupon and FRN auction sizes.

The Committee adjourned at 2:45 p.m.

The Committee reconvened at 3:30 p.m.

The Chair summarized key elements of the Committee report for Secretary Bessent and followed with a discussion of recent market developments.

The Committee adjourned at 4:40 p.m.

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Brian Smith

Deputy Assistant Secretary for Federal Finance

United States Department of the Treasury

November 4, 2025

Certified by:

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Deirdre Dunn, Chair

Treasury Borrowing Advisory Committee

November 4, 2025

Treasury Borrowing Advisory Committee Quarterly Meeting

Committee Charge - November 4, 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.

Optimal Debt Model

Please present on updated results from the TBAC's Optimal Debt issuance model. How has the optimal issuance strategy changed in recent years and what have been the drivers of that change? What advantages and limitations to the model are most relevant to consider in the current environment? Please elaborate. Are there other approaches or models that Treasury should also consider for thinking about optimal debt issuance? Should Treasury consider other metrics for measuring rollover risk, volatility, liquidity, and term premium. What metrics are most useful and why?

Financing this Quarter

We would like the Committee's advice on the following:

• The composition of Treasury notes and bonds to refund approximately $98.2 billion of privately-held notes maturing on November 15, 2025.
• The composition of Treasury marketable financing for the remainder of the October-December 2025 quarter.
• The composition of Treasury marketable financing for the January-March 2026 quarter.