The Treasury Borrowing Advisory Committee (TBAC) held its quarterly meeting on February 3, 2026, at the Department of the Treasury. Most committee members were present, with only Jill Funk and Anastasia Titarchuk absent. Rudy Gopinath from Citigroup attended to assist the Committee Chair. Several Treasury officials, including Deputy Assistant Secretary for Federal Finance Brian Smith and Director of Policy & Planning Hunter McMaster, participated alongside staff from the Federal Reserve Bank of New York.
Deputy Assistant Secretary Smith opened the session by expressing appreciation for outgoing member Gagan Singh’s service and providing an update on recent debt management activities. The annual review of Committee guidelines was also presented by Treasury counsel.
Director of the Office of Fiscal Projections Nick Steele reported significant changes in federal receipts and outlays during the first quarter of fiscal year 2026. Customs deposits increased by 315%, or $71 billion, due to higher tariff revenue. Withheld taxes rose by $47 billion and non-withheld taxes by $45 billion. However, corporate tax collections dropped by 23%, or $27 billion, which was attributed to provisions in the OBBB that allowed for accelerated expensing and depreciation. On the spending side, interest payments on public debt led to a 13% ($48 billion) rise in Treasury outlays. The Department of Education saw a decrease in outlays by 26% ($11 billion), while other categories—mainly due to reduced disbursements from the Environmental Protection Agency and FEMA—fell by 64% ($68 billion).
Director Fred Pietrangeli addressed deficit projections and privately-held net marketable borrowing estimates. He noted that primary dealers had lowered their aggregate FY2026-28 borrowing estimate by $258 billion. At current issuance sizes, Treasury is slightly overfunded for FY2026; however, forecasts suggest a funding shortfall of $1.1 trillion could emerge in FY2027-28 if current trends continue.
Deputy Director Tom Katzenbach reviewed expectations regarding coupon issuance among primary dealers. There was consensus that current auction sizes would meet financing needs through FY2026, with adjustments in bill supply expected to address any shifts in requirements. Dealers cited anticipated Federal Reserve purchases of Treasury bills as supportive for demand within this segment.
Debt Manager Liang Jensen summarized dealer views on SOFR-indexed floating rate notes (FRNs). Dealers agreed that this market has grown quickly over five years with strong demand from money market mutual funds as well as banks and foreign investors. Most supported issuing SOFR-linked FRNs to diversify front-end issuance and potentially lower funding costs but cautioned about possible risks such as cannibalizing demand for existing products or exposure to rate spikes during market stress.
Debt Manager Gavin Ross discussed alternative buyback mechanisms based on feedback from dealers who suggested allowing yield spread offers could broaden participation and improve pricing in buyback operations. While exchange transactions are common practice among certain investor groups like leveraged investors or dealers, real-money investors might prefer cash transactions instead.
Debt Manager Joshua Stachura outlined support among dealers for issuing 7-year notes quarterly with two reopenings rather than monthly new issues—a change expected to improve secondary market liquidity without major effects on repo or futures markets.
The Committee also considered how best to align bill purchases with consolidated balance sheet considerations involving both Treasury and Federal Reserve activities—a topic previously explored in February 2020 presentations—and discussed under what circumstances issuance plans should focus solely on privately-held securities versus total outstanding debt.
During discussion about trends shaping investor demand for Treasuries, presenters highlighted factors such as SOMA runoff, growth in money market fund assets, expanding bank portfolios, evolving pension structures, increased foreign private holdings, and potential stablecoin-related demand. They concluded that incremental demand is likely strongest at short- and intermediate-term maturities going forward.
For upcoming quarters, TBAC unanimously recommended maintaining nominal coupon sizes along with FRN and TIPS auction levels unchanged.
At several points throughout the day-long meeting—including sessions adjourned for lunch—the Committee reviewed charges related to fiscal outlooks; bill purchases; investor trends; composition of notes/bonds maturing February 15; and recommendations for marketable financing through June 2026 before adjourning just before 4:00 p.m.
