Report to the Secretary of the Treasury from the Treasury Borrowing Advisory Committee

Dear Mr. Secretary,Since the TBAC last met in early August, Treasury markets have repriced toward a higher path for interest rates, reflecting stronger economic activity and associated financing needs, persistent energy-supply disruptions, and the Federal Reserve’s initial rate hike and projections for further increases. The selloff in rates was led by the front end of the yield curve, with two-year yields rising by roughly 50bps and ten-year yields by roughly 40bps. The move accelerated in September and early October, with ten-year yields peaking around 5.4% and thirty-year yields around 5.7% in early October. Some of that increase has since reversed.A substantial part of the repricing reflected stronger U.S. economic activity through the summer despite higher energy prices and rising rates. Household spending remained resilient as gains in financial wealth and lower savings rates cushioned pressure on real incomes.