Hunter McMaster, Director of Policy and Planning at the U.S. Department of the Treasury and acting Assistant Secretary for Financial Markets, addressed primary dealers at the Federal Reserve Bank of New York’s annual meeting. McMaster emphasized the importance of primary dealers in maintaining the liquidity and depth of the U.S. Treasury market.
McMaster outlined three main topics: Treasury’s cash balance policy, recent efforts to rebuild the Treasury General Account (TGA), and enhancements to the Treasury’s buyback program.
Treasury’s current cash balance policy, established in 2015, is designed as a risk management tool to ensure sufficient funds are available to meet one-week ahead cash needs. These needs include net fiscal outflows and maturing marketable debt. The policy aims to maintain readiness even if new funding is temporarily disrupted by events such as cyber-attacks or natural disasters.
Following an increase in the debt limit through legislation known as One Big Beautiful Bill on July 4, Treasury held $313 billion in its TGA—an amount McMaster described as below prudent levels given typical weekly maturities and obligations that can exceed $800 billion at certain points in a month. He explained that “$400 to $500 billion is the absolute bare minimum that Treasury needs to be compliant with its cash balance policy on any given day,” noting significant fluctuations due to timing of benefits payments like Medicare, Veterans Affairs, Supplemental Security Income, and Social Security.
Addressing speculation about possible changes to this policy, McMaster stated: “For the avoidance of doubt, our cash balance policy has not changed. And a change in our policy is not currently under consideration.”
Since July’s debt limit increase, Treasury has increased bill supply by $603 billion and raised its cash balance by about $500 billion. Most increases were focused on shorter bill maturities with close monitoring of market conditions. According to McMaster, absorption of this additional supply “has gone very well,” with strong demand reflected in auction metrics such as bid-to-cover ratios averaging nearly 3x since early July.
On repo markets, McMaster noted some short-lived pressures but said these were quickly resolved: “Although there were signs of modest repo market pressure… anecdotal market reports indicated that this event was well-absorbed and short-lived.”
Turning to buybacks introduced in May 2024 for both cash management and secondary market liquidity support purposes, McMaster reported purchases totaling over $113 billion for cash management and more than $115 billion for liquidity support since inception. He highlighted recent enhancements including doubling long-end buyback frequency and increasing aggregate annual size for cash management buybacks from $120 billion to $150 billion.
Regarding direct access for buybacks beyond primary dealers beginning in 2026, he said: “Broadening direct access to a select number of additional counterparties can enhance the level of liquidity support we provide… and improve our trade execution.” Eligibility criteria have been published recently; initial participants are non-primary dealer auction bidders with more than $35 billion awarded during early 2025.
Finally, McMaster announced plans for an upgrade to the Treasury Automated Auction Processing System (TAAPS) targeted for completion by late next year. The Bureau of Fiscal Service will coordinate overview sessions with stakeholders ahead of implementation.
He concluded by acknowledging primary dealers’ role: “You serve an invaluable role in ensuring that ours remains the deepest and most liquid market in the world…”
