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Market Outlook

US TGA ELEVATED LEVELS WILL SOON REQUIRE QE

ADMIN || 10th November 2025

In the final week of October, the Treasury General Account climbed to $1 trillion, well above the quarter-end target of $850bn. The elevated TGA balance and the associated reduction in bank reserves was largely unforeseen and contributed to the recent tightening in funding market conditions.

The reason Treasury kept a large TGA has to do with its internal policy of maintaining a sufficient balance to cover one-week-ahead cash needs. The required daily balance in late October was unusually high, exceeding $900bn on several days due to a heavy schedule of T-bills and coupons maturing alongside substantial month-end fiscal payments.

Somewhat ironically, the increase in bill supply that helped rebuild the TGA after the debt ceiling episode has led to larger volumes of bills maturing each week, which in turn demands a higher steady-state TGA balance. Meanwhile, the large volume of coupon debt issued during Covid is also coming due in droves. A consequence of more debt maturing in the near term is that the TGA has to grow along with it, and TGA volatility can periodically push bank reserves below desired levels, creating unwanted funding pressures as seen in the past when reserves were less abundant.

Looking ahead, we can expect the TGA to fall slightly from current levels and remain relatively steady into December, allowing reserve balances to stabilize. Anticipated bill issuance cuts early next month should also ease some of the funding strains. In 2026, Treasury will likely need to raise its TGA target to accommodate a growing volume of maturing debt, especially if bills make up a larger part of overall issuance. This in turn will eventually require the Fed to begin buying assets to offset the effect of TGA (and growth in currency) on reserves; we tentatively expect these purchases to begin in Q1, focusing on T-bills and front end Treasuries.

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