Treasury Presentation to TB
Office of Debt Manageme

Fiscal Year 2016 Q2 Report
Table of Contents

I. Executive Summary p. II. Fiscal

A. Quarterly Tax Receipts p. B. Monthly Receipt Levels p. C. Eleven Largest Outlays p. D. Treasury Net Nonmarketable Borrowing p. E. Cumulative Budget Deficits p. F. Deficit and Borrowing Estimates p. G. Budget Surplus/Deficit p. 

III. Financing

A. Sources of Financing p. B. OMB’s Projections of Net Borrowing from the Public p. C. Interest Rate Assumptions p. D. Net Marketable Borrowing on “Auto Pilot” Versus Deficit Forecasts p. 

IV. Portfolio Metrics

A. Weighted Average Maturity of Marketable Debt Outstanding with Projections p. B. Projected Gross Borrowing p. C. Maturity Profile p. 

V. Demand

A. Summary Statistics p. B. Bid-to-Cover Ratios p. C. Investor Class Awards at Auction p. D. Primary Dealer Awards at Auction p. E. Direct Bidder Awards at Auction p. F. Foreign Awards at Auction p. 
Section I:

Executive Summary
Receipts and Outlays

• Corporate taxes have been weaker than during the equivalent period last year, potentially attributable to the exten

depreciation and smaller corporate profits.

• Tax refunds are tracking in line with last year’s numbers.• Fiscal year-to-date, Treasury net expenditures rose by $40 billion, mainly attributable to larger interest expenses ($

higher inflation compensation on TIPS and higher interest expense on Government Account Series (GAS) debt.

• Medicare outlays were higher by $19 billion, mostly due to a $9 billion increase in payments made to prescription 

Sources of Financing in Fiscal Year 2016 

• Demand for Treasury bills remains strong and is expected to continue to grow through the end of FY 2016. As no

Quarterly Refunding Statement, Treasury believes that it is prudent to increase the level of Treasury bills outstandquarters. 

• Based on the Quarterly Borrowing Estimate, Treasury’s Office of Fiscal Projections currently projects a net borrow

billion for FY 2016. 

Projected Net Marketable Borrowing

• Between FY 2016 and 2018, Treasury’s borrowing from the public could rise notably if the Federal Reserve allows 

held in the SOMA portfolio to mature.

• There are $675 billion of Treasury securities in the SOMA portfolio that will mature between FY 2016 and 2018.

Bid-to-Cover Ratios (BTC)

• BTC ratios for FRNs and shorter-dated coupons have fallen slightly in recent months, while bills and the longer e

curve have been little changed. 

Investor Class Allotments

• Since the beginning of January, investment fund awards rose substantially in bills, and fell slightly for short coup

and TIPS. 

• Primary dealer awards fell slightly in bills, and rose in TIPS.• Direct bidder awards were modestly higher across most tenors.

Highlights of Treasury’s May 2016 Quarterly Refunding Pre

to the Treasury Borrowing Advisory Committee (TBA
Section II:

Fiscal
Source: United States Department of the Treasury 

(50%)(40%)(30%)(20%)(10%)

0%

10%20%30%40%50%60%

Mar-06

Jul-06

Nov-06

Mar-07

Jul-07

Nov-07

Mar-08

Jul-08

Nov-08

Mar-09

Jul-09

Nov-09

Mar-10

Jul-10

Nov-10

Mar-11

Jul-11

Nov-11

Mar-12

Jul-12

Nov-12

Mar-13

Jul-13

Nov-13

Mar-14

Jul-14

Nov-14

Year-over-Year % Change

Quarterly Tax Receipts

Corporate Taxes Non-Withheld Taxes (incl SECA) Withheld Taxes (incl FIC
Individual Income Taxes include withheld and non-withheld. Social Insurance Taxes include FICA, SECA, RRTA, UTF deposits, RUIA. Other includes excise taxes, estate and gift taxes, customs duties and miscellaneous receipts. Source: United States Department of the Treasury 

0

20406080

100120140

Mar-06

Jul-06

Nov-06

Mar-07

Jul-07

Nov-07

Mar-08

Jul-08

Nov-08

Mar-09

Jul-09

Nov-09

Mar-10

Jul-10

Nov-10

Mar-11

Jul-11

Nov-11

Mar-12

Jul-12

Nov-12

Mar-13

Jul-13

Nov-13

Mar-14

Jul-14

Nov-14

$ bn

Monthly Receipt Levels

(12-Month Moving Average)

Individual Income Taxes Corporation Income Taxes Social Insurance Taxes 
Source: United States Department of the Treasury 

0

100200300400500600

HHS

SSA

Defense

Treasury

Agriculture

Labor

VA

Transportation

OPM

Education

$ bn

Eleven Largest Outlays

Jan - Mar FY 2015 Jan - Mar FY 2016
Source: United States Department of the Treasury 

(40)(30)(20)(10)

0

102030

Q2-06

Q3-06

Q4-06

Q1-07

Q2-07

Q3-07

Q4-07

Q1-08

Q2-08

Q3-08

Q4-08

Q1-09

Q2-09

Q3-09

Q4-09

Q1-10

Q2-10

Q3-10

Q4-10

Q1-11

Q2-11

Q3-11

Q4-11

Q1-12

Q2-12

Q3-12

Q4-12

Q1-13

Q2-13

Q3-13

Q4-13

Q1-14

Q2-14

Q3-14

Q4-14

Q1-15

$ bn

Fiscal Quarter

Treasury Net Nonmarketable Borrowing

Foreign Series State and Local Govt. Series (SLGS) Savings Bonds
Source: United States Department of the Treasury 

0

100200300400500600700

October

November

December

January

February

March

April

May

June

July

August

$ bn

Cumulative Budget Deficits by Fiscal Year

FY2014 FY2015 FY2016
FY 2016-2018 Deficits and Net Marketable Borrowing Estimates 

Primary 

Dealers1 CBO2 CBO3 

FY 2016 Deficit Estimate 532 529 534 FY 2017 Deficit Estimate 550 433 550 FY 2018 Deficit Estimate 581 383 549 FY 2016 Deficit Ran

ge 400-595

FY 2017 Deficit Ran

ge 445-650

FY 2018 Deficit Range 475-710FY 2016 Net Marketable Borrowin

g Estimate 651 829 834 

FY 2017 Net Marketable Borrowin

g Estimate 601 508 621 

FY 2018 Net Marketable Borrowing Estimate 641 452 606 FY 2016 Net Marketable Borrowin

g Ran

ge 420-798

FY 2017 Net Marketable Borrowin

g Ran

ge 445-750

FY 2018 Net Marketable Borrowing Range 475-802Estimates as of: Apr-16 Mar-16 Mar-1

1Based on primary dealer feedback on April 25, 2016. Estimates above are averages. 2Table 1 and 2 of CBO's "An Analysis of the President's 2017 Budget"3Table 1 and 2 of CBO's "The Budget and Economic Outlook: 2016 to 2026"4Table S-13 of OMB's "Budget of the United States Government, Fiscal Year 2017"

*OFP's FY 2016 Net Marketable Borrowing Estimate
(1,600)(1,400)(1,200)(1,000)

(800)(600)(400)(200)

0

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

$ bn

Fiscal Year

Budget Surplus/Deficit

Surplus/Deficit in $bn (LHS) Surplus/Deficit as a % of GDP (RHS)

Projections are from Table S-13 of OMB's “Budget of the United States Government, Fiscal Year 2017” 

OMB’s Projection
Section III:

Financing
Assumptions for Financing Section (pages 15 to 22)

• Portfolio and SOMA holdings as of 3/31/2016.• SOMA reinvestments until Q3 CY2017, and SOMA redemptions until and including Februa

These assumptions are based on Chair Yellen’s December 2015 press conference and the meexpectations from the March FRB-NY survey of primary dealers. 

• Assumes announced issuance sizes and patterns constant for Nominal Coupons, TIPS, and 

3/31/2016, while using an average of ~$1.6 trillion of Bills outstanding. 

• The principal on the TIPS securities was accreted to each projection date based on market Z

as of 3/31/2016. 

• No attempt was made to match future financing needs. 
Sources of Financing in Fiscal Year 2016 Q2

*An end-of-March 2016 cash balance of $314 billion versus a beginning-of-January 2016 cash balance of $333 billion. By keeping th

constant, Treasury arrives at the net implied funding number. 

Net Bill Issuance 104 Security Gross Maturing Net Gro

Net Coupon Issuance 140 4-Week 690 650 40 1,15

Subtotal: Net Marketable Borrowing 244 13-Week 445 349 96 812 

26-Week 370 296 74 719 

Ending Cash Balance 314 52-Week 74 100 (26) 110 

Beginning Cash Balance 333 CMBs 0 80 (80) 95 

Subtotal: Change in Cash Balance (20) Bill Subtotal 1,579 1,475 104 2,89

Net Implied Funding for FY 2016 Q2* 264

Security Gross Maturing Net Gro

2-Year FRN 41 41 0 82 

2-Year 93 96 (3) 171 3-Year 74 96 (22) 146 5-Year 123 109 14 228 7-Year 102 48 53 189 

10-Year 66 22 44 132 30-Year 41 5 36 83 

5-Year TIPS 0 0 0 16 

10-Year TIPS 29 20 8 42 30-Year TIPS 9 0 9 16 

Coupon Subtotal 578 438 140 1,10

Total 2,157 1,913 244 3,99

Coupon Issuance 

January - March 2016 January - March 2016 

Bill Issuance 

January - March 2016 
Sources of Financing in Fiscal Year 2016 Q3

*Keeping announced issuance sizes and patterns constant for Nominal Coupons, TIPS, and FRNs as of 3/31/2016. Gross issuance reflect SOMA reinvestments. **Assumes an end-of-June 2016 cash balance of $350 billion versus a beginning-of-April 2016 cash balance of $314 billion.Financing Estimates released by the Treasury can be found here: http://www.treasury.gov/resource-center/data-chart-center/qrefunding/Pages/Latest.aspx

Assuming Constant Coupon Issuance Sizes*

Treasury Announced Net Marketable Borrowing** (65)

Net Coupon Issuance 5

Implied Change in Bills (70)

Security Gross Maturing Net Gross M

2-Year FRN 41 41 0 123 

2-Year 78 93 (15) 249 

3-Year 72 96 (24) 218 

5-Year 102 111 (9) 330 7-Year 84 82 2 273 

10-Year 63 23 40 195 30-Year 39 19 20 122 

5-Year TIPS 16 41 (25) 32 

10-Year TIPS 11 0 11 53 30-Year TIPS 5 0 5 21 

Coupon Subtotal 511 506 5 1,617 

April - June 2016

April - June 2016 Fiscal Y

Coupon Issuance Coupo
1012

635

561

659 633 648

753 777 754

848 

(400)(200)

0

200400600800

1,0001,200

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

$bn

OMB's Projection of Borrowing from the Public

Primary Deficit Net Interest Other Debt Held by Public

as % of GDP (RHS)

Debt Held by Public NeFinancial Assets as a % o

OMB’s projections of net borrowing from the public are from Table S-13 of the “Budget of the United States Government, Fiscal YData labels at the top represent the change in debt held by the public in $ billions. “Other” represents borrowing from the public direct and guaranteed loans.

$ bn %

Primary Deficit 720 9.0

Net Interest 6,011 75.3

Other 1,252 15.7

Total 7,983

FY2016 - FY2026 Cumulative Total
OMB's economic assumption of the 10-Year Treasury Note rates are from Table S-13 of the “Budget of the United States Governm

2017.” The forward rates are the implied 10-Year Treasury Note rates on March 31 of that year.

1

1.5

2

2.5

3

3.5

4

4.5

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

10-Year Treasury Note Rate, %

Interest Rate Assumptions: 10-Year Treasury Note

OMB FY 2017 Budget Implied Forward Rates as of 03/31/2016

10-Year Treasury Rate of 1.78% as of 3/31/2016
Treasury’s primary dealer survey estimates can be found on page 9. OMB's projections of net borrowing from the public are from 

the “Budget of the United States Government, Fiscal Year 2017.” CBO's estimates of the borrowing from the public are from TablAnalysis of the President’s 2017 Budget.” See table at the end of this section for details.

0

200400600800

1,0001,200

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

$ bn

Fiscal Year

Projected Net Borrowing Assuming Constant Future Issuan

Projected Net Borrowing CBO's "An Analysis of the President's 2017 BuOMB's FY 2017 Budget of the U.S. Government PD Survey Net Marketable Borrowing EstimatOFP's FY 2016 Net Marketable Borrowing Estimate
Impact of SOMA Actions on Projected Net Borrowing Assuming 

Issuance Remains Constant

Treasury’s primary dealer survey estimates can be found on page 9. OMB's projections of net borrowing from the public are from 

the “Budget of the United States Government, Fiscal Year 2017.” CBO's estimates of the borrowing from the public are from TablAnalysis of the President’s 2017 Budget.” See table at the end of this section for details.

0

200400600800

1,0001,200

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

Fiscal Year

Without Fed Reinvestments ($ bn)

Projected Net BorrowingCBO's "An Analysis of the President's 2017 Budget"OFP's FY 2016 Net Marketable Borrowing Estimate

0

200400600800

1,0001,200

2016

2017

2018

2019

2020

2021

Fiscal Year

With Fed Reinvestm

OMB's FY 2017 Budget of the UPD Survey Marketable Borrow
Additional Funding Gap Assuming No SOMA Roll

(112)

(181)

(335)

(378)

(259)

(174)

(400)(350)(300)(250)(200)(150)(100)

(50)

0

2016

2017

2018

2019

2020

2021

$ bn

Fiscal Year
Historical Net Marketable Borrowing and Projected Net Borro

Assuming Future Issuance Remains Constant, $ billions

Net Borrowing capacity does not reflect SOMA reinvestments. Treasury’s primary dealer survey estimates can be found on page 9. OMB's projections of net borrowing from the public are from 

the “Budget of the United States Government, Fiscal Year 2017.” CBO's estimates of the borrowing from the public are from TablAnalysis of the President’s 2017 Budget.”*OFP's FY 2016 Net Marketable Borrowing Estimate

Fiscal 

Year Bills 2/3/5 7/10/30 TIPS FRN

Historical/Projected 

Net Borrowing 

Capacity

OMB's FY 2017 

Budget of the U.S. 

Government

CBO's "An Analy

the President's 2

Budget "

2011 (311) 576 751 88 0 1,104 2012 139 148 738 90 0 1,115 2013 (86) 86 720 111 0 830 2014 (119) (92) 669 88 123 669 2015 (53) (282) 641 88 164 558 2016 216 (143) 438 59 41 611 687* 829 2017 51 (84) 221 47 (0) 234 635 508 

2018 0 1 202 42 (0) 244 561 452 

2019 0 20 67 43 0 130 659 578 2020 0 (12) 83 17 0 88 633 637 

2021 0 (24) 99 (1) 0 73 648 697 2022 0 36 133 (12) 0 157 753 838 2023 0 55 153 (10) 1 199 777 876 2024 0 10 160 (12) (0) 158 754 870 2025 0 (12) 154 (54) (0) 87 848 977 2026 0 (20) 169 (35) (0) 114 906 1,038 
Section IV:

Portfolio Metrics
This scenario does not represent any particular course of action that Treasury is expected to follow. Instead, it is intended to dem

basic trajectory of average maturity absent changes to the mix of securities issued by Treasury.

40455055606570758085

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Weighted Average Maturity (Months)

Calendar Year

Weighted Average Maturity of Marketable Debt Outstandi

Historical Adjust Nominal Coupons to Match Financing Needs Historical Average from 1980 to 

68.8 months on3/31/2016

59.1 month(Historical from 1980 
This scenario does not represent any particular course of action that Treasury is expected to follow. Instead, it is intended to dem

basic trajectory of average maturity absent changes to the mix of securities issued by Treasury.

0

500

1,0001,5002,0002,5003,0003,5004,000

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

$ bn

Projected Gross Borrowing excluding Bills for Fiscal Yea

Maturing in < 1 Year excluding Bills Projected Net Borrowing
This scenario does not represent any particular course of action that Treasury is expected to follow. Instead, it is intended to dem

basic trajectory of average maturity absent changes to the mix of securities issued by Treasury. See table on following page for de

05

10152025

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

$tr

Projected Maturity Profile from end of Fiscal Year

<= 1yr (1,2] (2,3] (3,5] (5,7] (7,10] > 10
This scenario does not represent any particular course of action that Treasury is expected to follow. Instead, it is intended to dembasic trajectory of average maturity absent changes to the mix of securities issued by Treasury. Portfolio composition by original 

and term can be found in the appendix (Page 43).

Recent and Projected Maturity Profile, $ billions

End of Fiscal Year <= 1yr (1,2] (2,3] (3,5] (5,7] (7,10] > 10 Tota

2008 2,152 711 280 653 310 499 617 5,222009 2,702 774 663 962 559 643 695 6,992010 2,563 1,141 895 1,273 907 856 853 8,482011 2,620 1,334 980 1,541 1,070 1,053 1,017 9,612012 2,951 1,373 1,104 1,811 1,214 1,108 1,181 10,742013 2,939 1,523 1,242 1,965 1,454 1,136 1,331 11,592014 2,935 1,739 1,319 2,207 1,440 1,113 1,528 12,282015 3,097 1,775 1,335 2,382 1,478 1,121 1,654 12,842016 3,349 1,846 1,585 2,446 1,527 1,194 1,824 13,772017 3,473 2,114 1,556 2,535 1,551 1,261 2,002 14,492018 3,772 2,072 1,628 2,583 1,609 1,312 2,143 15,112019 3,735 2,225 1,719 2,734 1,738 1,381 2,306 15,832020 3,852 2,325 1,688 2,915 1,829 1,388 2,540 16,532021 3,953 2,280 1,941 3,005 1,854 1,439 2,788 17,262022 3,908 2,593 1,948 3,154 1,963 1,448 3,080 18,092023 4,221 2,579 2,070 3,178 2,035 1,484 3,395 18,962024 4,251 2,757 2,104 3,334 2,141 1,525 3,700 19,812025 4,386 2,833 2,131 3,637 2,167 1,571 4,038 20,762026 4,461 2,845 2,395 3,737 2,308 1,660 4,370 21,77
This scenario does not represent any particular course of action that Treasury is expected to follow. Instead, it is intended to dem

trajectory of average maturity absent changes to the mix of securities issued by Treasury. See table on following page for details.

0%

10%20%30%40%50%60%70%80%90%

100%

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

Percent Compositioin

Projected Maturity Profile from end of Fiscal Year

<= 1yr (1,2] (2,3] (3,5] (5,7] (7,10] > 10
Recent and Projected Maturity Profile, percent

This scenario does not represent any particular course of action that Treasury is expected to follow. Instead, it is intended to dembasic trajectory of average maturity absent changes to the mix of securities issued by Treasury. Portfolio composition by original 

and term can be found in the appendix (Page 43).

End of Fiscal Year <= 1yr (1,2] (2,3] (3,5] (5,7] (7,10] > 10 (0,3

2008 41.2 13.6 5.4 12.5 5.9 9.6 11.8 60.2009 38.6 11.1 9.5 13.7 8.0 9.2 9.9 59.2010 30.2 13.4 10.5 15.0 10.7 10.1 10.0 54.2011 27.2 13.9 10.2 16.0 11.1 10.9 10.6 51.2012 27.5 12.8 10.3 16.9 11.3 10.3 11.0 50.2013 25.4 13.1 10.7 17.0 12.5 9.8 11.5 49.2014 23.9 14.2 10.7 18.0 11.7 9.1 12.4 48.2015 24.1 13.8 10.4 18.5 11.5 8.7 12.9 48.2016 24.3 13.4 11.5 17.8 11.1 8.7 13.2 49.2017 24.0 14.6 10.7 17.5 10.7 8.7 13.8 49.2018 25.0 13.7 10.8 17.1 10.6 8.7 14.2 49.2019 23.6 14.0 10.9 17.3 11.0 8.7 14.6 48.2020 23.3 14.1 10.2 17.6 11.1 8.4 15.4 47.2021 22.9 13.2 11.2 17.4 10.7 8.3 16.2 47.2022 21.6 14.3 10.8 17.4 10.8 8.0 17.0 46.2023 22.3 13.6 10.9 16.8 10.7 7.8 17.9 46.2024 21.5 13.9 10.6 16.8 10.8 7.7 18.7 46.2025 21.1 13.6 10.3 17.5 10.4 7.6 19.4 45.2026 20.5 13.1 11.0 17.2 10.6 7.6 20.1 44.
Section V:

Demand
*Weighted averages of Competitive Awards.**Approximated using prices at settlement and includes both Competitive and Non-Competitive Awards. For TIPS’ 10-year equi

constant auction BEI is used as the inflation assumption.

Summary Statistics for Fiscal Year 2016 Q2 Auctions

Security 

Type Term Stop Out Rate (%)* Bid-to-Cover Ratio* Competitive Awards ($bn) % Primary Dealer* % Direct* % Indirect* Non-Competitive Awards ($bn) 

Bill 4-Week 0.262 3.4 685.8 59.9 7.3 32.8 3.7 Bill 13-Week 0.300 3.4 436.3 60.9 8.9 30.3 4.8 Bill 26-Week 0.453 3.7 360.7 50.4 5.6 44.0 4.9 Bill 52-Week 0.630 3.5 72.9 66.7 5.4 28.0 0.8 

Coupon 2-Year 0.830 2.8 77.5 33.6 12.8 53.7 0.5 Coupon 3-Year 1.019 2.8 71.8 38.7 11.1 50.2 0.2 Coupon 5-Year 1.335 2.4 102.8 33.2 8.6 58.2 0.2 Coupon 7-Year 1.646 2.5 84.9 24.8 14.8 60.3 0.1 Coupon 10-Year 1.900 2.6 63.9 24.0 12.7 63.3 0.1 Coupon 30-Year 2.698 2.2 40.0 30.6 11.0 58.4 0.0 

TIPS 10-Year 0.552 2.2 26.0 33.1 6.6 60.4 0.0 TIPS 30-Year 1.120 2.1 7.0 26.9 2.8 70.3 0.0 

FRN 2-Year 0.251 3.5 41.0 52.5 5.0 42.5 0.0 

Total Bills 0.334 3.5 1,555.7 58.3 7.3 34.5 14.1 

Total Coupons 1.460 2.6 441.0 31.0 11.8 57.3 1.0 

Total TIPS 0.672 2.2 32.9 31.8 5.7 62.5 0.1 

Total FRNs 0.251 3.5 41.0 52.5 5.0 42.5 0.0 
1

1.5

2

2.5

3

3.5

4

4.5

5

5.5

6

Mar-06

Mar-07

Mar-08

Mar-09

Mar-10

Mar-11

Mar-12

Mar-13

Mar-14

Bid-to-Cover Ratio

Bid-to-Cover Ratios for Treasury Bills

4-Week (13-week moving average) 13-Week (13-week moving average)26-Week (13-week moving average) 52-Week (6-month moving average)
2

2.5

3

3.5

4

4.5

5

5.5

6

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Jan-15

Feb-15

Mar-15

Apr-15

May-15

Jun-15

Jul-15

Aug-15

Sep-15

Oct-15

Nov-15

Dec-15

Bid-to-Cover Ratio

Bid-to-Cover Ratios for FRNs
1

1.5

2

2.5

3

3.5

4

4.5

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep15

Bid-to-Cover Ratio

Bid-to-Cover Ratios for 2-, 3-, and 5-Year Nominal Securiti

(6-Month Moving Average)

2-Year 3-Year 5-Year
1

1.5

2

2.5

3

3.5

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Bid-to-Cover Ratio

Bid-to-Cover Ratios for 7-, 10-, and 30-Year Nominal Securit

(6-Month Moving Average)

7-Year 10-Year 30-Year
1

1.5

2

2.5

3

3.5

Mar-06

Mar-07

Mar-08

Mar-09

Mar-10

Mar-11

Mar-12

Mar-13

Mar-14

Bid-to-Cover Ratio

Bid-to-Cover Ratios for TIPS

5-Year 10-Year (6-month moving average) 20-Year 30-Year
Excludes SOMA add-ons. The “Other” category includes categories that are each less than 2%, which include Depository InstitutPension and Insurance.

0%5%

10%15%20%25%30%

Mar-12

May-12

Jul-12

Sep-12

Nov-12

Jan-13

Mar-13

May-13

Jul-13

Sep-13

Nov-13

Jan-14

Mar-14

May-14

Jul-14

Sep-14

Nov-14

Jan-15

Mar-15

May-15

Jul-15

Sep-15

13-week moving average

Percent Awarded in Bill Auctions by Investor Class 

(13-Week Moving Average)

Other Dealers and Brokers Investment Funds Foreign and International 
Excludes SOMA add-ons. The “Other” category includes categories that are each less than 2%, which include Depository InstitutPension and Insurance.

0%5%

10%15%20%25%30%35%40%45%50%

Mar-12

May-12

Jul-12

Sep-12

Nov-12

Jan-13

Mar-13

May-13

Jul-13

Sep-13

Nov-13

Jan-14

Mar-14

May-14

Jul-14

Sep-14

Nov-14

Jan-15

Mar-15

May-15

Jul-15

Sep-15

6-month moving average

Percent Awarded in 2-, 3-, and 5-Year Nominal Security 

Auctions by Investor Class (6-Month Moving Average)

Other Dealers and Brokers Investment Funds Foreign and International 
Excludes SOMA add-ons. The “Other” category includes categories that are each less than 2%, which include Depository InstitutPension and Insurance.

0%

10%20%30%40%50%60%

Mar-12

May-12

Jul-12

Sep-12

Nov-12

Jan-13

Mar-13

May-13

Jul-13

Sep-13

Nov-13

Jan-14

Mar-14

May-14

Jul-14

Sep-14

Nov-14

Jan-15

Mar-15

May-15

Jul-15

Sep-15

6-month moving average

Percent Awarded in 7-, 10-, 30-Year Nominal Security Aucti

by Investor Class (6-Month Moving Average)

Other Dealers and Brokers Investment Funds Foreign and International 
Excludes SOMA add-ons. The “Other” category includes categories that are each less than 2%, which include Depository InstitutPension and Insurance.

0%

10%20%30%40%50%60%70%

Mar-12

May-12

Jul-12

Sep-12

Nov-12

Jan-13

Mar-13

May-13

Jul-13

Sep-13

Nov-13

Jan-14

Mar-14

May-14

Jul-14

Sep-14

Nov-14

Jan-15

Mar-15

May-15

Jul-15

Sep-15

6-month moving average

Percent Awarded in TIPS Auctions by Investor Class

(6-Month Moving Average)

Other Dealers and Brokers Investment Funds Foreign and International 
Excludes SOMA add-ons. 

20%30%40%50%60%70%80%

Mar-12

May-12

Jul-12

Sep-12

Nov-12

Jan-13

Mar-13

May-13

Jul-13

Sep-13

Nov-13

Jan-14

Mar-14

May-14

Jul-14

Sep-14

Nov-14

Jan-15

Mar-15

May-15

Jul-15

Sep-15

% of Total Competitive Amount Awarded

Primary Dealer Awards at Auction

4/13/26-Week (13-week moving average) 52-Week (6-month moving average)2/3/5 (6-month moving average) 7/10/30 (6-month moving average)TIPS (6-month-moving average)
Excludes SOMA add-ons. 

0%5%

10%15%20%25%30%

Mar-12

May-12

Jul-12

Sep-12

Nov-12

Jan-13

Mar-13

May-13

Jul-13

Sep-13

Nov-13

Jan-14

Mar-14

May-14

Jul-14

Sep-14

Nov-14

Jan-15

Mar-15

May-15

Jul-15

Sep-15

% of Total Competitive Amount Awarded

Direct Bidder Awards at Auction

4/13/26-Week (13-week moving average) 52-Week (6-month moving average)2/3/5 (6-month moving average) 7/10/30 (6-month moving average)TIPS (6-month-moving average)
Foreign includes both private sector and official institutions.

0

20406080

100120

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Jan-15

Feb-15

Mar-15

Apr-15

May-15

Jun-15

Jul-15

Aug-15

Sep-15

Oct-15

Nov-15

Dec-15

$ bn

Total Foreign Awards of Treasuries at Auction, $ billions

Bills 2,3,5 7,10,30 TIPS FRN
Appendix
This scenario does not represent any particular course of action that Treasury is expected to follow. Instead, it is intended to dem

trajectory of average maturity absent changes to the mix of securities issued by Treasury. See table on following page for details.

0%

10%20%30%40%50%60%70%80%90%

100%

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

End of Fiscal Year

Projected Portfolio Composition by Issuance Type

Bills 2,3,5 7,10,30 TIPS (principal accreted to projection date) FRN
Recent and Projected Portfolio Composition by Issuance Type, 

This scenario does not represent any particular course of action that Treasury is expected to follow. Instead, it is intended to dembasic trajectory of average maturity absent changes to the mix of securities issued by Treasury. 

End of Fiscal 

Year Bills 2-, 3-, 5-Year Nominal Coupons 7-, 10-, 30-Year Nominal Coupons Total Nominal Coupons TIPS (principal 

to projection 

2008 28.5 34.5 26.9 61.4 10.0 2009 28.5 36.2 27.4 63.6 7.9 2010 21.1 40.1 31.8 71.9 7.0 2011 15.4 41.4 35.9 77.3 7.3 2012 15.0 38.4 39.0 77.4 7.5 2013 13.2 35.8 43.0 78.7 8.1 2014 11.5 33.0 46.0 79.0 8.5 2015 10.6 29.4 49.0 78.3 8.8 2016 11.4 27.6 49.9 77.5 8.7 2017 11.2 27.4 50.3 77.8 8.7 2018 10.7 27.5 50.8 78.3 8.8 2019 10.3 28.0 50.8 78.9 8.8 2020 9.8 28.4 51.1 79.5 8.7 2021 9.4 28.4 51.8 80.2 8.5 2022 9.0 28.5 52.6 81.0 8.2 2023 8.6 28.7 53.1 81.8 7.9 2024 8.2 28.6 53.9 82.5 7.6 2025 7.8 28.6 54.8 83.4 7.2 2026 7.5 28.7 55.5 84.2 6.9 
*Weighted averages of Competitive Awards. 

**Approximated using prices at settlement and includes both Competitive and Non-Competitive Awards.

Issue Settle Date Stop Out Rate (%)* Bid-to-Cover Ratio* Competitive Awards ($bn) % Primary Dealer* % Direct* % Indirect* Non- Competitive Awards ($bn) SOMA Add Ons ($bn) 

4-Week 1/7/2016 0.200 3.44 44.7 74.4 3.2 22.4 0.3 0.0 4-Week 1/14/2016 0.220 3.35 44.7 62.9 8.2 28.8 0.3 0.0 4-Week 1/21/2016 0.250 3.09 49.7 76.1 3.9 20.0 0.3 0.0 4-Week 1/28/2016 0.295 3.69 54.7 57.4 4.1 38.4 0.3 0.0 4-Week 2/4/2016 0.270 3.59 54.7 50.0 9.9 40.1 0.3 0.0 4-Week 2/11/2016 0.265 3.55 54.7 57.3 7.8 34.9 0.3 0.0 4-Week 2/18/2016 0.270 3.23 54.7 69.5 5.7 24.8 0.3 0.0 4-Week 2/25/2016 0.285 3.39 54.7 54.5 8.9 36.6 0.3 0.0 4-Week 3/3/2016 0.295 3.29 54.6 43.7 7.5 48.9 0.3 0.0 4-Week 3/10/2016 0.275 3.44 59.6 54.9 11.3 33.8 0.3 0.0 4-Week 3/17/2016 0.280 3.22 59.6 61.9 9.3 28.8 0.3 0.0 4-Week 3/24/2016 0.270 3.56 54.7 59.0 8.9 32.2 0.2 0.0 4-Week 3/31/2016 0.200 3.28 44.6 62.0 4.5 33.6 0.3 0.0 

13-Week 1/7/2016 0.215 3.56 27.5 69.6 11.8 18.7 0.4 0.0 13-Week 1/14/2016 0.215 3.74 27.6 65.1 7.2 27.7 0.4 0.0 13-Week 1/21/2016 0.255 3.41 30.6 61.4 15.7 22.9 0.4 0.0 13-Week 1/28/2016 0.305 3.31 32.7 63.8 7.7 28.5 0.3 0.0 13-Week 2/4/2016 0.350 3.44 36.5 59.3 7.2 33.5 0.4 0.0 13-Week 2/11/2016 0.315 3.38 36.5 57.5 11.5 31.0 0.4 0.0 13-Week 2/18/2016 0.300 3.41 36.5 57.4 9.4 33.2 0.4 0.0 13-Week 2/25/2016 0.320 3.18 35.8 79.4 7.6 13.0 0.3 0.0 13-Week 3/3/2016 0.325 3.26 36.4 62.8 5.8 31.4 0.3 0.0 13-Week 3/10/2016 0.315 3.47 36.6 59.7 10.2 30.1 0.3 0.0 13-Week 3/17/2016 0.335 3.47 36.4 54.6 3.7 41.7 0.4 0.0 13-Week 3/24/2016 0.300 3.41 33.5 51.2 10.9 37.9 0.3 0.0 13-Week 3/31/2016 0.300 3.81 29.8 50.5 7.9 41.6 0.3 0.0 26-Week 1/7/2016 0.500 3.96 25.5 50.4 6.8 42.8 0.3 0.0 26-Week 1/14/2016 0.470 4.19 25.4 48.0 8.7 43.3 0.5 0.0 26-Week 1/21/2016 0.370 3.67 25.3 75.5 4.7 19.7 0.5 0.0 26-Week 1/28/2016 0.415 3.39 26.7 61.8 5.9 32.3 0.4 0.0 26-Week 2/4/2016 0.465 3.86 29.3 44.6 5.8 49.6 0.4 0.0 26-Week 2/11/2016 0.420 3.86 29.3 37.4 7.5 55.1 0.4 0.0 26-Week 2/18/2016 0.410 3.43 29.4 59.0 6.1 34.9 0.4 0.0 26-Week 2/25/2016 0.455 3.83 28.7 36.2 3.9 59.9 0.4 0.0 26-Week 3/3/2016 0.480 3.46 29.6 48.4 4.2 47.4 0.3 0.0 26-Week 3/10/2016 0.475 3.84 29.6 42.2 4.7 53.1 0.3 0.0 26-Week 3/17/2016 0.510 3.61 29.6 56.2 2.2 41.5 0.3 0.0 26-Week 3/24/2016 0.440 3.19 27.5 60.8 7.6 31.6 0.3 0.0 26-Week 3/31/2016 0.475 3.58 24.9 37.1 5.5 57.5 0.3 0.0 52-Week 1/7/2016 0.670 3.95 15.9 68.6 4.4 27.0 0.1 0.0 52-Week 2/4/2016 0.530 3.59 17.8 68.8 5.5 25.7 0.2 0.0 52-Week 3/3/2016 0.660 3.29 19.8 67.8 5.5 26.6 0.2 0.0 

Bills
*Weighted averages of Competitive Awards.**Approximated using prices at settlement and includes both Competitive and Non-Competitive Awards. For TIPS’ 10-Year Equ

constant auction BEI is used as the inflation assumption.

Issue Settle Date Stop Out Rate (%)* Bid-to-Cover Ratio* Competitive Awards ($bn) % Primary Dealer* % Direct* % Indirect* Non- Competitive Awards ($bn) 

2-Year 2/1/2016 0.860 2.90 25.8 29.8 12.3 57.9 0.2 2-Year 2/29/2016 0.752 2.91 25.8 33.4 10.8 55.8 0.2 2-Year 3/31/2016 0.877 2.58 25.8 37.4 15.2 47.4 0.2 3-Year 1/15/2016 1.174 2.94 24.0 27.8 9.4 62.8 0.0 3-Year 2/16/2016 0.844 2.74 23.9 43.5 15.0 41.5 0.1 3-Year 3/15/2016 1.039 2.71 23.9 44.7 9.1 46.2 0.1 5-Year 2/1/2016 1.496 2.44 34.9 37.8 8.6 53.5 0.1 5-Year 2/29/2016 1.169 2.44 33.9 22.7 10.0 67.3 0.1 5-Year 3/31/2016 1.335 2.38 33.9 38.9 7.2 53.9 0.1 7-Year 2/1/2016 1.759 2.63 29.0 15.8 14.8 69.4 0.0 7-Year 2/29/2016 1.568 2.25 28.0 32.3 14.2 53.5 0.0 7-Year 3/31/2016 1.606 2.51 28.0 26.7 15.5 57.8 0.0 

10-Year 1/15/2016 2.090 2.77 21.0 17.7 11.3 71.0 0.0 10-Year 2/16/2016 1.730 2.56 23.0 22.4 15.3 62.3 0.0 10-Year 3/15/2016 1.895 2.49 20.0 32.4 11.1 56.5 0.0 30-Year 1/15/2016 2.905 2.29 13.0 32.6 10.8 56.5 0.0 30-Year 2/16/2016 2.500 2.09 15.0 31.7 10.3 58.0 0.0 30-Year 3/15/2016 2.720 2.33 12.0 27.0 12.0 60.9 0.0 

2-Year FRN 2/1/2016 0.272 3.67 15.0 42.7 2.2 55.2 0.0 2-Year FRN 2/26/2016 0.237 3.63 13.0 60.8 10.0 29.2 0.0 2-Year FRN 3/28/2016 0.240 3.07 13.0 55.6 3.2 41.2 0.0 

Issue Settle Date Stop Out Rate (%)* Bid-to-Cover Ratio* Competitive Awards ($bn) % Primary Dealer* % Direct* % Indirect* Non- Competitive Awards ($bn) 

10-Year TIPS 1/29/2016 0.725 2.19 15.0 33.5 9.9 56.6 0.0 10-Year TIPS 3/31/2016 0.315 2.25 11.0 32.4 2.0 65.5 0.0 30-Year TIPS 2/29/2016 1.120 2.11 7.0 26.9 2.8 70.3 0.0 

Nominal Coupons

TIPS
Treasury Borrowing Advisory Committee Presenta

To what extent has fixed income dynamics in overseas markets a

demand for US Treasuries? Please also assess the challenges famajor global sovereign borrowers over the medium term. How archallenges similar to or different from the case of the United Stat
Agenda

I: Economic outlook of major economies outside the US, and recent poli

Record low yields outside US, and a collapse in term premia in c

II: Impact on the US Treasury market

Sharp change in the demand base, from official to privateTreasury demand has stayed strong; some challenges on the liqu

III: Impact on other sovereign debt issuers

Opportunity to term out issuance

IV: Medium-term challenges 

Interest costs will become a larger part of the conversationLimited flexibility to handle next economic downturnFed unwind of QE could pose a challenge Change in demand base to more price-sensitive buyers
I: Recent fiscal/policy actions in other major economie
Experience with negative interest rates

http://www.bankofcanada.ca/wp-content/up

Source: Bank o

Central Bank Action ReasonDenmark

July 2012 to April 2014: Certificates of deposit rate lowered to -0.2%;raised to -0.1% in January 2013, and back to positive in April 2014; September 2014 onward: Cut the certificates of deposit rate to -0.75% in a series of steps. Current account cap raised from DKK37 billion to DKK 173billion.

To discourage capital upward pressure on thTo manage upward prkrone. Current accounto reduce costs to the sector of the negative 

Euro area

June 2014 onward: Lowered the Deposit Facility Rate (DFR) to -0.1% in June 2014, -0.2% in September 2014, -0.3% in December 2015 and -0.4% in March 2016.

Subdued growth and woutlook (successively downward)

Sweden

July 2009 to September 2010: Cut deposit rate to -0.25%. July 2014 onward: Deposit rate lowered into negative territory (-0.5%). Beginning in February 2015, the repo rate became negative (-0.1%) and was subsequently lowered to -0.35%, bringing the deposit rate to -1.10%.

Deep recessionPersistently below targ

Switzerland

1972: Penalty charge of 2% per quarter applied to the increase in CHF deposits from non-residents. Increased to 3% in November 1973 and 105 in February 1978.December 2014 onward: Target range for the 3-month Libor lowered to -1.25% to -0.5% in two steps. Rate on sight deposits at the SNB lowered to -0.75%. 

To discourage capital particularly from oil-excountries. To manage upward prfranc, weak growth anover deflation. 

Japan

January 2016 onward: The BoJ adopted a three-tier system in which the outstanding balance of each financial institution's current account at the Bank will be divided into three tiers, to each of which a positive interest rate, a zero interest rate or a negative interest rate are applied, respectively

To achieve the price sof 2 percent at the eartime
Growth and inflation forecasts have been revised 

Further downward revisions to our global growth and inflation outlook since Nove

Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 2015 2016 2017 2016 2016 

Global 3.2 2.7 2.5 3.4 3.7 3.2 3.1 3.7 -0.3 -0.1 United States 2.0 1.4 0.5 2.0 2.5 2.4 1.7 2.4 -0.8 -0.3 Japan 1.4 -1.1 -0.1 1.0 1.6 0.5 0.4 1.0 -0.7 -0.2 Uniited Kindom 1.8 2.4 1.0 0.0 2.5 2.3 1.5 1.9 -0.4 -0.5 Euro area 1.2 1.3 1.4 1.5 1.7 1.5 1.4 1.7 -0.2 -0.1 Advanced 1.7 1.1 0.8 1.6 2.1 1.9 1.5 2.0 -0.5 -0.3 Emerging 4.4 3.9 3.7 4.8 4.9 4.2 4.3 4.9 -0.1 0.1 Brazil -6.7 -5.8 -2.4 -1.2 0.4 -3.8 -3.1 0.6 -1.4 0.0 Mexico 3.3 2.2 2.8 0.8 1.6 2.5 2.2 2.7 -0.3 -0.5 China 6.9 6.5 6.3 6.5 5.9 6.9 6.4 5.8 0.4 0.0 India 8.1 4.4 6.6 10.4 8.9 7.3 7.6 8.0 -0.4 0.0 South Korea 5.0 2.7 2.0 2.0 2.7 2.6 2.5 2.4 -0.5 -0.2 Indonesia 4.2 7.3 4.5 5.3 4.9 4.8 5.4 6.0 0.0 0.4 Poland 2.7 4.2 3.6 2.5 3.7 3.4 3.6 4.1 0.2 0.0 Russia -2.3 -3.0 -0.2 0.0 1.4 -3.7 -1.0 1.5 -1.0 0.3 Turkey 3.1 6.8 0.0 3.4 3.5 4.0 3.3 3.6 0.4 0.0 South Africa 0.7 0.6 0.6 0.6 0.9 1.3 0.6 1.4 -1.2 -0.3 

vs. Nov. 

GO

vs. 

Consen 

Real GDP (% change) In

Barclays
• With inflation well below target, inflation expectations (nearly) at historical lows

subdued, and recent euro strength, the ECB surprised with a broad package a

 More QE: Additional EUR20bn purchases, bringing monthly APP purchases to EUR80b

 More CE: Added corporate debt to APP + new 4year TLTRO II programme (as low as -

if banks meet some lending thresholds; if not, there is no mandatory early re

 A moderate rate cut: Cut the depo rate to -0.40%, the refi rate to 0%, and the MLF to 

 ECB signalled limited-scope for more depo cuts (on financial stability concerns). Reinforced forward guidance: low rates to remain well below the end of the APP (Ma

• XXX

Expectations still signal weak m

dynamics

ECB-dated EONIA forwards signal that another 10bp depo

rate cut could come before year end

ECB: more QE/CE and fewer rate cuts

0.81.01.31.51.82.02.32.5

Apr-14 Oct-14 Apr-15 O

EUR Swap 2y3y EUR Swap 5y

% y/ y

-45-40-35-30

0%

20%40%60%80%

100%

Apr-16 Jun-16 Jul-16 Sep-16 Oct-16 Dec-16

depo at -50bpdepo at -55bpdepo at -60bpEonia fwd,bp, rhs
BoE Monetary policy: Further down the river she s

• In March 2016, we pushed back our call for a hate hike from Q4 16 to Q2 17 due to ou

domestic economy is slowing, only magnified by EU referendum uncertainties, the ongoinsignificant domestic inflationary pressures and an uncertain global economy and jittery fina

• Our call is predicated on three key assumptions:

1. the UK remains a member of the EU following the 23 June referendum;2. post-referendum, we see a pick-up in investment and private consumption; and3. nominal wage pressures build up over 2016, reaching approximately 3% 3m/y by the 

• We continue to expect a hike every six months, allowing the Committee to gather sufficien

reassess its stance between hikes, but acknowledge risks of a wider period between hikescautious narrative from central banks regarding uncertain global economic and financial coacknowledge the risk that the Committee may leave more than six months between hikes.

A hike in the Bank Rate appears off the table in the short-term

Dove-Hawk meter (as at April 2016 meeting)

Voted for +25bp

More likely to vote 

for a rate hike

Lesslikely to vote 

for a rate hike

Jon Cunliffe 

Kristin Forbes

Nemat Shafik

Mark Carney

Martin Weale

Ben Broadbent

Ian McCafferty

Gertjan Vlieghe

Andy Haldane 
Japan: Monetary and fiscal policy initiatives since 

Feb-15

The Abe government formed a supplementary budget of JPY3.1trn (0.6% of GDP) mainly to supconsumers and local economies

Jan-16 The Abe government formed a supplementary budget of JPY3.3trn (0.7% of GDP) mainly to sup

and earthquake-affected regions

Currently

Given the Kumamoto earthquake that occurred in April 2016, the Abe government is considerinanother supplementary budget probably during the current Diet session that ends on 1 June.There is a growing possibility that PM Abe will postpone the VAT hike planned for April 2017, not rush to make that decision, which could be interpreted as a failure of his policy program (Abuild an economy resilient to such a hike

Fiscal measures since 2015
II: Impact on the US Treasury market
Shifting demand base for Treasuries: from offic

Source: US Treasury, Fede

Foreign investors and the Fed did not absorb issuance in 2015 Private domestic investor

0

200400600800

1,0001,2001,4001,6001,800

2007 2008 2009 2010 2011 2012 2013 2014 2015

$bn

Foreign Sector flows Federal Reserve flowsNet Tsy Issuance

-400

0

400800

1,2001,6002,000

2007 2008 2009 2010 2011 

$bn

Money Market Banking Sector Mutual funds 

Shift from official foreign investors to private foreign 

-350-250-150

-50

50

150250350

Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16

12m change

China+Belgium Holdings of Tsy, $bn Financial centers Holdings of Tsy, $bn 

Foreign investors have ter

3.03.54.04.55.05.56.06.57.0

2005

2006

2007

2008

2009

2010

Duration Est (yrs), Dom 
Domestic investor participation has increased 

Source: U

Domestic fund participation has increased... ...across all tenors, more at th

0%

10%20%30%40%50%60%70%80%

05 06 07 08 09 10 11 12 13 14 15

B/ Ds Foreign investors Domestic funds

...especially at the 

1.52.02.53.03.54.04.5

04 05 06 07 08 09 10 

Bid-cover r

Front (2s3s) Belly (5s/ 

0%

10%20%30%40%50%60%

Jun-09 Jun-10 Jun-11 Jun-12 Ju

3m avg

2s/ 3s Domestic 10/ 30s Domestic

Bid-cover ratio remain higher than pre-crisis...

1.01.52.02.53.03.54.0

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

Total Bid-cover at nominal cpn auctions
Reasons for the shift in demand base

Source: Haver Analytics, Bloomberg, Fed

Banks have been strong buyers u

regulatory pur

FX reserves and foreign official holdings of UST – in sync

1,500 2,000 2,500 3,000 3,500 4,000 4,500 

600800

1,0001,2001,4001,6001,800

09 10 11 12 13 14 15 16

China+Belgium Holdings of Tsy, $bn (LHS)China's FX Reserve (RHS, $bn)

G10 GDP has disappointed

400450500550600650700

09 10 11 12 13 

$bn

Tsy and non-MBS holdings 

Estimated non-FDI capital o

0.51.01.52.02.53.0

11 12 13 14 15 16

Consensus G10 GDP forecast

12 13 14 15 16
Dislocations have increased amid decline in offic

Source

Our measure of front end dislocations has risen Swap spreads have 

0.50.70.91.11.31.51.71.9

Jan-14 Jul-14 Jan-15 Jul-15 Jan-16

RMSE, 2-5y sector, bp

Dealer holdings of Treasuries has picked up Higher secured rates relative t

-20-15-10

-5

05

1015202530

Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16

$bn

<3y 3- 6y 6y - 11y >11y

-30-20-10

0

1020304050

10 11 12 13 

bp

GC-Fed Fu

-60-40-20

0

204060

10 11 12 13 

bp

30y swap spreads 
Metrics of liquidity in the Treasury market

OTR10s vs old10s Treasury futures have 

0.3%0.4%0.5%0.6%0.7%0.8%0.9%1.0%

24-Feb 2-Mar 9-Mar 16-M

CTD implied repo

Term GC FV 

Securities likely to be the CTD trade rich, in the belly... ...and the long 

-5-4-3-2-1

012

Jan-14 Jul-14 Jan-15 Jul-15 Jan-16

bp

OTR10s vs old10s, error to spline

-3.0-2.0-1.0

0.01.02.03.0

17 18 19 20 21 22

Maturity

Spd to spline, bp

5y series

FVZ6CTD

FVM6 CTDFVU6 

CTD

OTR5s

-200 -150-100

-50

0

50

100150200

Feb-40 Feb-41 Feb-42 Feb-4

bp

1y forward yields Ps - match# of WN cts potential CTD, f
III: Impact on other sovereign debt issuers
Average Life extended at record low interest rates in E

EGB Core debt average residual maturity – trending up

4.04.55.05.56.06.57.07.58.08.5

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

Austria BelgiumFinland FranceGermany NL

EGB Periphery debt average 

rebounding n

4.55.05.56.06.57.07.5

Jan-10 Jan-11 Jan-12 Jan-13 

EGB Core Interest Cost as % of Gross Debt

23456

Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16

Austria BelgiumFinland FranceGermany NL

EGB Periphery Interest Cos

3456

Jan-04 Jan-06 Jan-08 Jan-1

Ireland Italy 

Source: Barclays Research, Ha
2-3 5 10 >10 2-3 5 10 >10 2-3 

Germany 3% -4% 0% 1% 34% 26% 33% 7% 31% France -1% -3% 10% -5% 20% 21% 40% 18% 21% Italy -5% -6% 4% 7% 26% 25% 33% 16% 31% Spain 5% -11% -3% 9% 22% 22% 36% 20% 17% Belgium 7% -5% -5% 2% 7% 7% 49% 38% 0% Holland 2% -2% -1% 0% 34% 22% 32% 13% 31% Portugal 0% -21% 21% 0% 0% 5% 76% 18% 0% Finland 12% -35% -6% 29% 12% 9% 37% 42% 0% Austria 0% -15% 17% -3% 13% 10% 68% 9% 13% Ireland 0% 36% -69% 32% 0% 36% 0% 64% 0% Eurozone Aggregates 0% -6% 3% 4% 24% 22% 37% 17% 24% 

Difference 2015 vs 2014 2015 

ECB QE seeing issuance being skewed to longer 

02468

1012141618

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2016 2015 2014 2013 2012

Weighed Monthly Average Life Issuance in Spain – heavier longer end issuance so far 

Extension of maturities by issuers, especially in the more opportunistic periphe
ECB QE: Displacement effect in the EGB market

Displacement effect in the EGB market under expanded QE EGB market ownership of th

Sourc
EGB issuers have adopted more flexibility in various fo

Changes in issuing procedures over the past few years

Source: Nat

Austria More emphasis on investor relationsBelgium

Increased focus on predictability and flexibility in order to respond to changing market environment, achieved throucommunication. Moved to monthly auctions from every other month frequency.

Finland Diversification of funding sources, more coordination with PDs. France

More issuance at the ultra long end thanks to QE helping push investors further out and lower yields. The Tresor mflexible to meet off-the-run bond demand from ECB QE: the proportion of total issuance relying on off-the-run issue2011 at 33% in 2015 compared to 21.8% in 2014. Introduction of new long end 20y benchmark alongside 15, 30 a

Germany

Continued to commitment to high predictability in issuance patterns. In 2016, Finance Agency switched to more fre30y bond and also in off-the-runs instead of large 1-2 tap approach in pure new benchmarks

Ireland Syndications are used also for re-openings than just new issuance. Private placements are also used (eg. new 100y Italy

More commitment to regularity, transparency and predictability while taking advantage of QE to issue more in medand reduce short-term ones. More off-the-run taps, new 7y and 20y line introduction, issuance of BTP Italia in recetechnical measures.

Netherlands

Dutch Treasury aims to extend average maturity of debt from 4.5yrs at 2014 to as high as 6.5yrs going forward. Its interest rate swaps and increase budgetary stability and reduces future risks through the extension of the maturity 

Spain

Very regular detailed updates in its debt management presentation to enhance transparency. Alongside regular aucmore flexibility seeked through alternative funding tools such as private placements and possibility of special auctio

Portugal

Very regular detailed updates in its debt management presentation to enhance transparency. Bond market volatility to syndications of new benchmarks as well as reopenings.

United Kingdom

In a notable move at the March 16 budget, UK DMO allowed itself more flexibility to respond to market conditions tregulatory backdrop and market infrastructure. The DMO has now elected to increase the frequency of and reduce auctions alongside other technical measures.
Bid to covers are broadly stable in short end... ...and also in belly 

EGB bid-cover ratios and tails have been stable

Periphery bid to covers have also not shown any clear 

trend in the past few years

Tails in German auctions have aver

since 201

0.00.51.01.52.02.53.03.54.04.5

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

2y bid to cover Germany2y bid to cover France

0.01.02.03.04.05.06.0

Jan-10 Jan-11 Jan-12 Jan-13 Jan-

5y bid 5y bid 5y bid 5y bid 

0.01.02.03.04.05.06.0

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

3y bid to cover Italy3y bid to cover Spain

0.03.06.09.0

12.015.0

Jan-10 Jan-11 Jan-12 Jan-13 Jan

GermGermGerm

Tail: average price minus lowest accepte
-6

-5-4-3-2-1

0123456789

101112

(-15) (-12) (-9) (-6) (-3) (0) (3) (6) (9) (12) (15)

Change in spread 

(bps)

Days before/ after auction

5 10

Auction concessions vs Bund in peripheral Europe

-10

-9-8-7-6-5-4-3-2-1

01

(-15) (-12) (-9) (-6) (-3) (0) (3) (6) (9) (12) (15)

Change in spread 

(bps)

Days before/ after auction

5 10 over 10

Core/semi-core EGB issuers experience modest auction concessions especially at the ul

-11-10

-9-8-7-6-5-4-3-2-1

01234

(-15) (-12) (-9) (-6) (-3) (0) 

Change in spread 

(bps)

Days 

5 

While peripheral bonds also experience auction concessions, they are much less than the eur

-12-11-10

-9-8-7-6-5-4-3-2-1

012345678

(-15) (-12) (-9) (-6) (-3) (0) 

Change in spread 

(bps)

Days be

2 

Source: Barclays Research, Note: auction concessions are calculate

France 

Spain 

Italy
-80

-60-40-20

0

20406080

100

Domestic 

MFIs

Domestic 

OtherFIs

Domestic 

Other

Non Residen

EGB ownership and ECB’s QE support for net iss

20%25%30%35%40%45%50%55%60%65%

2009 2010 2011 2012 2013 2014 2015

% SPGBs held by foreigners (ex ECB)% of BTPs owned externally (ex ECB)

Non resident ownership has been stable in core EGBs but increasing in periphery after sharp 

EGB QE has been strongly supportive of net issuance since QE started 

SPGB flows

Italian security flows

Source: Barclays Research, National Ce

50%55%60%65%70%75%80%85%

04 05 06 07 08 09 10 

France Germa
Despite negative rates, MMF total assets have 

Source: Hav

Euro MMF total assets and ECB’s monetary policy MMF shares held by non-reside

-50

0

50100150200250300350

600700800900

1,0001,1001,2001,3001,400

Jun-07 Aug-09 Sep-11 Oct-13 Dec-15

Eur MMF Tot. Assets, Eur bnDepo rate, bp, rhs

0

100200300400500600700800900

Jun-07 Aug-09 Sep-11 

Eur MMF shares - held bEur MMF shares - held b

MMF asset breakdown... non EA assets allocation has increased

MMF holdings of non EA resident is

while those issued by M

0

200400600800

1,0001,2001,400

Jun-07 Aug-08 Sep-09 Oct-10 Nov-11 Dec-12 Jan-14 Feb-15

Loans to MFIs Gen. Gov. Debt

Other EA residents debt MFI debt

Non EA residents Assets MMF shares 0

100200300400500600700

Jun-07 Aug-09 Sep-11 

Securities issued by nDebt issued by EA MDebt issued by other 
IV: Medium term challenges for the US Treasury
A rise in rates can put greater focus on interes

So

Interest costs expected to rise as share of total deficit

0.00.51.01.52.02.53.03.54.04.55.0

2015 2017 2019 2021 2023 2025

Primary Deficit, % of GDP Interest Cost, % of GDP

1.01.52.02.53.03.5

2015 2017 2019 2021 2

Interest Cost, % of GDP (LHS)Interest Cost, % of Total RevenInterest Cost, % of non-interes

In basecase, interest costs to rea

revenue) in 10ye

Debt to GDP increase in 1% inter

707580859095

2015 2017 2019 2021 

Debt to GDPDebt to GDP, under 1% 

05

101520253035

2015 2017 2019 2021 2023 2025

% increase in interest cost, if interest rates rise by 1%

% increase in interest costs if rates rise by 1% per year
Flexibility to handle next economic downturn

Source: IMF WEO, Hav

Debt to GDP to remain elevated in G7 economies Debt to GDP ratio in the US i

0

102030405060708090

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

%

General Gov Net Debt, % of GDP

0%

10%20%30%40%50%60%70%80%90%

100%

52 57 62 67 72 77 82 87 92 9

Mkt Debt/ nominal GDP 
Enough flexibility on issuance profile in the me

Source: US Treasury, NY Fed, Hav

Current auction coupons vs max size estimate (from PD Survey) Treasury not likely to hit against ma

Multi-decade high WAM gives room for shortening if required Bills, as share of outstand

05

1015202530354045

2y 3y 5y 7y 10y 30y 2y 

FRN

5y 

TIPS

10y 

TIPS

30y 

TIPS

$bn

Max Size from PD survey Current

4045505560657075

81 86 91 96 01 06 11 16

mths

WAM of marketable debt

0%5%

10%15%20%25%30%35%

97 00 03 06 

Bills, % of marke
Potential unwind of QE is a medium term chall

Source: Hav

Fed holdings of Treasuries has risen... Longer tenor holdings at SO

0%5%

10%15%

55 60 65 70 75 80 85 90 95 00 05 10 15

Fed's Tsy holdings, % of nominal GDP

SOMA Maturity 

-0.5

0.00.51.01.52.0

Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

10y term premium, %

Term premia rose sharply during taper tantrum, and bunds 

yields rose sharply

0%

10%20%30%40%50%60%

05 07 09 11 

<1y 

0.00.20.40.60.81.01.2

Jan-15 Apr-15 Jul-15 Oct-

Bund yield
A decline in demand from price insensitive inve

Source: IMF WEO, Ha

02468

101214

03 05 07 09 11 13 15

World Reserve Assets, $trn

World reserve assets have plateaued Regulatory demand from banks for Tre

400450500550600650700

09 10 11 12 13 

$bn

Tsy and non-MBS holdings 

Household holdings of Treasuries has increased sharply... ...as has holdings by mu

-200

0

200400600800

1,0001,200

90 95 00 05 10 15

Households holding of Treasuries, $bn

0

100200300400500600700800

90 95 00 

Mutual Fund holdings 
Structural changes in market present a challen

Source

Turnover has declined in sovereign bond markets... Futures command a higher 

PTF are typically 56% of 10y volumes in cash space... ... and 51% in futu

0%

50%

100%150%200%250%

04 06 08 10 12 14

Monthly customer cash volumes, % of float

US Germany UK Japan

0%

20%40%60%80%

100%

04 06 08 10 

Futures volume, % of (custome

US Germany Italy UK 

0%

35%

4%

56%

5%

0%

10%20%30%40%50%60%

Asset Mgrs Bank/ Dlr Hedge Fund PTF Non-bank 

Dlr

Volume, 10y Cash

4%

16% 15%

5

0%

10%20%30%40%50%60%

Asset 

Mgrs

Bank/ Dlr Hedge 

Fund

P

Volume, 10y Futu

PTFs trade more frequently, in smaller sizes and with lower fill ratios than bank-dealers