Williams says Treasury's TGA rebuild in early July drained system liquidity through rapid bill issuance.
“The Treasury began to rebuild its TGA balance in early July. This involved a rapid increase in net bill issuance and a commensurate drain of system liquidity.”
Williams says Treasury expects TGA balances could peak around $1.025 trillion by late April, drawing down reserves.
“Treasury recently estimated that TGA balances could peak around $1.025 trillion by late April, amid tax season inflows, likely resulting in a notable drawdown in reserves.”
Williams notes TGA rises $175-400 billion during April tax season then declines gradually.
“Over the past several years, the TGA has risen by somewhere between roughly $175 billion and $400 billion during April tax season and has gradually declined back to more normal levels thereafter ( Panel 11 ).”
Williams says the Treasury General Account could increase by half a trillion dollars in coming months.
“By way of example, we are currently in the midst of a debt ceiling episode, which—if past experience is a guide—could see the TGA fall further before rapidly increasing by half a trillion dollars or more over the course of a few months.”
Williams states Treasury repo market has over $8 trillion in daily average transaction volume.
“Given the size of the Treasury repo market—with over $8 trillion in daily average transaction volume—and its interconnectedness with other segments of financial markets, sound risk management is critical.”
Williams says Treasury's target TGA balance has grown from $320 billion in 2016 to $850 billion in 2025.
“Treasury has increased its assumed quarter-end TGA balance from $320 billion in early 2016 to $850 billion on average in 2025.”