Treasury Presentation to TBAC
Office of Debt Management

Fiscal Year 2023 Q4 Report
Table of Contents*

2

I. Executive Summary – Highlights of TBAC Presentation p. 4

II. Recent Fiscal Results

A. Monthly Receipts Chart and Highlights of Large Changes in Receipts Categories p.6

B. Largest Outlays Chart and Highlights of Largest Outlays p.7

C. Cumulative Budget Deficits p.8

III. Various Fiscal Forecasts

A. Recent Macroeconomic Forecasts p.10 

B. Recent Deficit Forecasts p.11

C. Historical Changes in Various Deficit Forecasts p.12

D. Interest Rate Assumptions for Various Forecasts p.13

IV. Estimated Borrowing Needs and Financing Implications 

A. Short-Term Privately-Held Net Marketable Borrowing Estimates p.16

B. Implied Bill Funding for the Next Two Quarters p.17

C. Longer-Term Borrowing Estimates p.18

D. Historical Changes in Various Privately Held Net Marketable Borrowing Forecasts p.19

E. Longer-Term Projected Privately-Held Net Marketable Borrowing Needs p.20

V. Select Portfolio Metrics

A. Historical & Hypothetical Projected Weighted Average Maturity p.23

B. Weighted Average Next Rate Reset Chart (WANRR) p.24

C. Historical & Hypothetical Projected Percentage Product Distributions p.25

D. Historical & Hypothetical Projected Rollover Percentages p.26

VI. Select Demand Metrics

A. Bid-to-Cover Metrics p.28-32

B. Investor Class Metrics p.33-37

C. Direct Awards and Primary Dealer Awards p.38-39 

D. Foreign Demand at Auction and Treasury Security Holdings p.40-41

VII. Appendix p.43-55

*All sources are from Treasury unless otherwise specified 
Section I:

Executive Summary
Receipts and Outlays through Q4 FY2023

Treasury’s Projected Net Privately-held Marketable Borrowing for the Next Two Fiscal Quarters

Projected Net Privately-held Marketable Borrowing for the Next Three Fiscal Years from Various Sources* 

Latest Market Expectations for Treasury Financing in October 2023:

Highlights of Treasury’s November 2023 Quarterly Refunding Presentation

to the Treasury Borrowing Advisory Committee (TBAC)

Fiscal Year Primary Dealers, Median October 

2023 ($ billion)

OMB MSR July 2023 

($ billion) CBO Budget, June 2023 ($ billion)

2024 2,500 2,735 2,257 

2025 1,950 1,849 1,763 

2026 1,898 1,696 1,676 

$ billion Change from same period 

last year ($ billion)

Change from same 

period last year (%)

As % of 

GDP

Change from same 

period last year 

(GDP %)

Total Receipts thru Q4 FY2023 $4,439 -$457 -9% 16.5% -2.8%

Total Outlays thru Q4 FY2023 $6,134 -$137 -2% 22.8% -2.0%

Treasury OFP Near Term Fiscal 

Projections

Net Privately Held Marketable 

Borrowing ($ billion)

Assumed End-of-Quarter 

Cash Balance ($ billion)

Q1 FY2024 776 750 (Dec)

Q2 FY2024 816 750 (Mar)

*All privately-held net marketable borrowing estimates are “normalized” with details from page 18. 

Uncertainty regarding funding needs in FY2024 to FY2026 remains relatively high, reflecting a variety of views on the path 

of monetary policy, the duration of SOMA redemptions, and the outlook for the economy. 

• Primary dealers generally expected increases in coupon auction sizes consistent with the changes that were made at the 

August refunding, though some expected the pace of long-end increases to moderate. In October, dealers boosted their 

aggregate median estimates for privately-held net marketable borrowing by a cumulative $622 billion for the FY24-FY25 

period, relative to their July estimates for the same 2 years.

• Given the forecasted financing gap over FY2024 and beyond, all dealers noted that both bill and coupon auction sizes would 

need to be increased to address near term financing gaps. Several dealers expect bill share to temporarily exceed TBAC’s 

recommended 15-20% range but did not express any concerns given the current demand for T-bills. 

• Most dealers expected a $1 billion increase to the 5-year TIPS reopening in December, consistent with the increase to the 

October new issue, and a $1 billion increase to the 10-year new issue in January. 4
Section II:

Recent Fiscal Results

Receipts, Outlays, and Deficits
6

Tax receipts for Q4 FY2020 reflect the adjustment of April and June 2020 tax deadlines to July 15th, 2020. Individual Income Taxes include withheld and 

non-withheld. Social Insurance Taxes include FICA, SECA, RRTA, UTF deposits, FUTA and RUIA. Other includes excise taxes, estate and gift taxes, 

customs duties and miscellaneous receipts. 

50

100

150

200

250

Sep-13

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-16

Mar-17

Jun-17

Sep-17

Dec-17

Mar-18

Jun-18

Sep-18

Dec-18

Mar-19

Jun-19

Sep-19

Dec-19

Mar-20

Jun-20

Sep-20

Dec-20

Mar-21

Jun-21

Sep-21

Dec-21

Mar-22

Jun-22

Sep-22

Dec-22

Mar-23

Jun-23

Sep-23

$bn

Monthly Receipt Levels

(12-Month Moving Average)

Individual Income Taxes Corporate Income Taxes Social Insurance Taxes Other

Notable Receipt Category

YoY change thru Q4 

FY23 ($ billion)

YoY change thru 

Q4 FY23 (%) Comments

Non-withheld and SECA taxes -$293 -24% Mainly due to 40% lower tax receipts in the April-May period than last year's record level. 

Individual refunds -$127 -52%

A decrease in cash due to elevated IRS processing of refunds over the fiscal year, including 

inventory. 

Federal Reserve earnings -$106 -99% Remittances have decreased year-over-year as administered rates moved higher. 

Withheld & FICA taxes 

(calendar adjusted) +$119 +4% Due to higher wages and employment, partially offset by December's lower bonuses.
7

-200

200

400

600

800

1,000

1,200

1,400

1,600

1,800

$ bn

Largest Outlays

Oct - Sep FY2022 Oct - Sep FY2023

Outlays in the chart above are on calendar adjusted basis

Notable Outlay Category

YoY change thru 

Q4 FY23 ($ billion)

YoY change thru 

Q4 FY23 (%) Comments

Social Security Administration 

(calendar adjusted) +$139 +11%

Primarily due to increases from cost-of-living adjustments and increased 

number of beneficiaries.

Health and Human Services 

(calendar adjusted) +$96 +6% Due to higher Medicare and Medicaid outlays. 

Department of Defense 

(calendar adjusted) +$53 +7%

Due to increased spending for military personnel, operations, maintenance 

and procurement.

Department of Treasury -$55 -5%

Interest on the Public Debt was $162 billion higher (23%); while outlays for 

COVID-19 relief grants were $105 billion lower (-99%) and Tax Credits were 

$97 billion (-28%) lower compared to last year.

Department of Education -$680 -106% Due to several Federal Direct Student Loan program modifications. 

Other (not in the chart above) +$274 +195%

Federal Deposit Insurance Corporation outlays are $101 billion higher. FCC 

spectrum auction receipts (negative outlays) were booked in January 2022 

($81 billion).
8

0

500

1,000

1,500

2,000

2,500

3,000

October

November

December

January

February

March

April

May

June

July

August

September

$ bn

Cumulative Budget Deficits by Fiscal Year

FY2021 FY2022 FY2023
Section III:

Various Fiscal Forecasts

Primary Dealers, OMB, CBO
10

Recent Economic Forecasts 

Note: Economic assumptions for July 2023 OMB and Feb 2023 CBO forecasts were established in June 2023 and December 2022, respectively.

Economic assumptions from July 2023 CBO forecasts were not reflected in the most recent May CBO budget updates. Budget and Economic 

Data | Congressional Budget Office (cbo.gov)

Primary Dealer Median Estimates October 2023

CY2023 CY2024 CY2025

 % Change from Q4 to Q4

GDP

 Real 2.5 0.5 na

 Nominal 5.2 2.9 na

Inflation

 CPI Headline 3.4 2.5 na

 CPI Core 4.0 2.7 na

 Fourth Quarter Levels 

Unemployment Rate (%) 3.8 4.5 na

FY2024 FY2025 FY2026

Deficits ($bil) $1,800 $1,850 $1,800

CBO Estimates February 2023

CY2023 CY2024 CY2025

 % Change from Q4 to Q4

GDP

 Real 0.1 2.5 2.6

 Nominal 3.1 4.9 4.8

Inflation

 CPI Headline 4.0 2.4 2.1

 Fourth Quarter Levels 

Unemployment Rate (%) 5.1 4.8 4.6

FY2024 FY2025 FY2026

Deficits ($bil) $1,501 $1,649 $1,586

CBO Estimates July 2023

CY2023 CY2024 CY2025

 % Change from Q4 to Q4

GDP

 Real 0.9 1.5 2.4

 Nominal 3.8 3.9 4.5

Inflation

 CPI Headline 3.3 2.7 2.2

 Fourth Quarter Levels 

Unemployment Rate (%) 4.1 4.7 4.5

OMB Estimates July 2023

CY2023 CY2024 CY2025

 % Change from Q4 to Q4

GDP

 Real 0.4 1.8 2.4

 Nominal 3.5 4.1 4.5

Inflation

 CPI Headline 3.3 2.5 2.3

 Fourth Quarter Levels 

Unemployment Rate (%) 4.2 4.3 4.1

FY2024 FY2025 FY2026

Deficits ($bil) $1,877 $1,698 $1,561
Recent Deficit Forecasts 

11

• Primary dealers increased their deficit estimates in October relative to estimates they provided in July. 

• Dealers generally suggested that risks were asymmetric to the upside, i.e., risks for higher deficits and 

noted a high degree of uncertainty around their estimates. 

• The latest OMB and CBO estimates in the table below are provided for reference.

• OMB projections are using estimates are from Table S-1 of “Mid-Session Review, Budget of The U.S. Government,” July 2023.

• CBO projections are using estimates are from Table 1 of “How the Fiscal Responsibility Act of 2023 Affects CBO’s Projections of Federal Debt ,” 

June 2023. 

Deficit Estimates ($ billion)

PD 25th 

Percentile

Primary Dealers 

(Median)

PD 75th 

Percentile

Change from Prior 

Quarter (Median) OMB CBO

FY2024 1,688 1,800 1,807 200 1,877 1,501

FY2025 1,725 1,850 1,900 162 1,698 1,649

FY2026 1,728 1,800 1,950 na 1,561 1,586

As of date Oct-23 Oct-23 Oct-23 Jul-23 Jun-23
12

Evolution of Median Primary Dealer, OMB, and CBO

Deficit Estimates

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Nov

2021

Feb

2022

May

2022

Aug

2022

Nov

2022

Feb

2023

May

2023

Aug

2023

Nov

2023

$ bn

TBAC date

FY 2024

PD FY24 OMB FY24 CBO FY24

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Nov 2022 Feb 2023 May 2023 Aug 2023 Nov 2023

$ bn

TBAC date

FY 2025

PD FY25 OMB FY25 CBO FY25

600

800

1,000

1,200

1,400

1,600

1,800

2,000

Nov 2023 Feb 2024 May 2024 Aug 2024 Nov 2024

$ bn

TBAC date

FY 2026

PD FY26 OMB FY26 CBO FY26
13

3

3.5

4

4.5

5

5.5

6

2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

10-Year Treasury Note Rate, %

Interest Rate Assumptions: 10-Year Treasury Note

Implied Forward Rates as of 10/30/2023 OMB Budget (Mar 2023)

CBO Budget (Feb 2023) OMB MSR (Jul 2023)

CBO Econ Assumptions (Jul 2023)

10-Year Treasury Rate of 4.87% as of 10/30/2023
Section IV:

Estimated Borrowing Needs and 

Financing Implications
15

Assumptions for Financing Section (pages 16 to 20)

• Portfolio and SOMA holdings as of 9/30/2023, unless otherwise noted (see slide 20).

• Estimates assume privately announced issuance sizes and patterns remain constant for nominal 

coupons, TIPS, and FRNs given the issuance sizes in effect in October 2023, while using total bills 

outstanding of ~$5.3 trillion, unless otherwise noted (see slide 20). 

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

as of 9/30/2023, unless otherwise noted (see slide 20).

• No attempt was made to account for future financing needs. 

• Privately-held marketable borrowing excludes rollovers (auction “add-ons”) of Treasury securities 

held in the Federal Reserve System Open Market Account (SOMA) but includes financing required due 

to SOMA redemptions. Secondary market purchases of Treasury securities by SOMA do not directly 

change net privately-held marketable borrowing but, all else equal, when the securities mature and 

assuming the Fed does not redeem any maturing securities, this would increase the amount of cash 

raised for a given privately-held auction size by increasing the SOMA “add-on” amount. These 

borrowing estimates are based upon current law and do not include any assumptions for the impact of 

additional legislation that may be passed.
16

Privately-Held Net Marketable Borrowing Outlook

$0

$200

$400

$600

$800

$1,000

$1,200

Q1 Q2 Q3 Q4

$ bn

FY22 FY23 FY24 (projection-OFP)
17

* Keeping announced issuance sizes and patterns constant for nominal coupons, TIPS, and FRNs. 

** Assumes end-of-December 2023 and end-of-March 2024 cash balances of $750 billion and $750 billion respectively versus end-of-September cash balance of $657

billion. Financing Estimates released by the Treasury can be found here: http://www.treasury.gov/resource-center/data-chart-center/quarterlyrefunding/Pages/Latest.aspx

Implied Bill Funding for Next Two Quarters Based on 

Recent Borrowing Estimates

Assuming Constant 

Coupon Issuance Sizes*

Treasury Announced Net 

Marketable Borrowing**

776

Net Coupon Issuance 316

Implied Change in Bills 460

Security Gross Maturing Net Gross Maturing Net

2-Year FRN 74 76 (2) 74 76 (2)

2-Year 150 174 (24) 150 174 (24)

3-Year 138 131 7 138 131 7

5-Year 153 73 80 153 73 80

7-Year 113 73 40 113 73 40

10-Year 108 55 53 108 55 53

20-Year 42 0 42 42 0 42

30-Year 63 0 63 63 0 63

5-Year TIPS 42 0 42 42 0 42

10-Year TIPS 15 0 15 15 0 15

30-Year TIPS 0 0 0 0 0 0

Coupon Subtotal 898 582 316 898 582 316

Coupon Issuance Coupon Issuance

Sources of Privately-Held Financing in FY24 Q1

October - December 2023

October - December 2023 Fiscal Year-to-Date

Assuming Constant 

Coupon Issuance Sizes*

Treasury Announced Net 

Marketable Borrowing**

816

Net Coupon Issuance 230

Implied Change in Bills 586

Security Gross Maturing Net Gross Maturing Net

2-Year FRN 50 70 (20) 124 146 (22)

2-Year 153 162 (9) 303 336 (33)

3-Year 138 159 (21) 276 291 (15)

5-Year 156 79 77 309 152 157

7-Year 114 71 43 227 145 82

10-Year 108 47 61 216 102 114

20-Year 42 0 42 84 0 84

30-Year 63 0 63 126 0 126

5-Year TIPS 0 0 0 42 0 42

10-Year TIPS 32 47 (15) 47 47 0

30-Year TIPS 9 0 9 9 0 9

Coupon Subtotal 865 635 230 1,763 1,218 545

Sources of Privately-Held Financing in FY24 Q2

January - March 2024

January - March 2024 Fiscal Year-to-Date

Coupon Issuance Coupon Issuance
18

• *All privately-held net marketable borrowing estimates of are “normalized” using:

• 1) the median Primary Dealer’s estimates for SOMA redemptions, and 

• 2) PD’s median end of fiscal year 2024 cash balance of $733 billion, held constant in out years. 

• OMB projections are using estimates are from Table S-1 of “Mid-Session Review, Budget of The U.S. Government,” July 2023. Adjusted to reflect 

the latest assumptions about student loans.

• CBO projections are using estimates are from Table 1 & 2 of “How the Fiscal Responsibility Act of 2023 Affects CBO’s Projections of Federal Debt ,” 

June 2023. 

Longer-Term Privately-Held Net Marketable Borrowing Estimates and 

SOMA Redemption Assumptions

FY 2024-2026 Deficits and Privately-Held Net Marketable Borrowing Estimates, in $ billions

25th Median 75th

FY 2024 Deficit 1,688 1,800 1,807 1,877 1,501

FY 2025 Deficit 1,725 1,850 1,900 1,698 1,649

FY 2026 Deficit 1,728 1,800 1,950 1,561 1,586

FY 2024 SOMA Redemption 540 630 720

FY 2025 SOMA Redemption 0 0 180

FY 2026 SOMA Redemption 0 0 0

FY 2024 Privately-Held Net Marketable Borrowing* 2,305 2,500 2,560 2,735 2,257

FY 2025 Privately-Held Net Marketable Borrowing* 1,815 1,950 2,050 1,849 1,763

FY 2026 Privately-Held Net Marketable Borrowing* 1,750 1,898 1,994 1,696 1,676

Estimates as of: Oct-23 Jul-23 Jun-23

Primary Dealer OMB CBO
19

Evolution of Median Primary Dealer, OMB, and CBO 

Privately-Held Net Marketable Borrowing Estimates*

* Note that both the OMB and CBO privately-held net marketable borrowing estimates are calculated by adjusting their respective deficit 

estimates using dealer’s median SOMA redemption estimates. In addition, all the PD, OMB and CBO privately-held borrowings are 

normalized with the same cash balance changes. See slide 18 for details.

500

1000

1500

2000

2500

3000

Nov

2021

Feb

2022

May

2022

Aug

2022

Nov

2022

Feb

2023

May

2023

Aug

2023

Nov

2023

$ bn

TBAC date

FY 2024

PD FY24 OMB FY24 CBO FY24

500

1000

1500

2000

2500

Nov 2022 Feb 2023 May 2023 Aug 2023 Nov 2023

$ bn

TBAC date

FY 2025

PD FY25 OMB FY25 CBO FY25

500

1,000

1,500

2,000

2,500

Nov 2023 Feb 2024 May 2024 Aug 2024 Nov 2023 Feb 2024

$ bn

TBAC date

FY 2026

PD FY26 OMB FY26 CBO FY26
20

Projected Privately-Held Net Marketable Borrowing 

Assuming Private Coupon Issuance & Total Bills Outstanding Remain Constant as of 10/31/2023*

*Treasury’s latest primary dealer survey median/interquartile range estimates can be found on page 18. OMB’s borrowing projections are from 

Table S-1 of “Mid-Session Review, Budget of The U.S. Government,” July 2023. Adjusted to reflect the latest assumptions about student loans. 

CBO’s borrowing projections are using estimates from Table 2 of “How the Fiscal Responsibility Act of 2023 Affects CBO’s Projections of 

Federal Debt ,” June 2023. OMB and CBO borrowing estimates from FY24 to FY26 are normalized to privately-held net borrowing after adding 

PD survey median SOMA redemption assumptions for FY24/25/26. In addition, all privately-held net borrowing estimates are normalized with 

PD’s FY24 median ending cash balance of $733 billion.

0

500

1,000

1,500

2,000

2,500

3,000

2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

$bn

Fiscal Year

Projected Privately-Held Net Marketable Borrowing

Adj Privately-Held Net Borrowing from CBO's budget, Jun 2023

Adj Privately-Held Net Borrowing from OMB's budget, Jul 2023

Adj Privately-Held Net Marketable Borrowing from PD survey, Oct 2023

PD 75th 

percentile

PD 25th 

percentile

PD 50th percentile

PD Survey at 25th, 50th and 75th Percentile
Section V:

Select Portfolio Metrics
22

Note: Several of the portfolio metric charts that follow include three years of projected metrics. 

These projections are hypothetical and are meant for illustrative purposes only. The projections

contained in these charts should not be interpreted as representing any future policy decisions regarding 

Treasury financing. 

Projections illustrate how various portfolio metrics could evolve under three hypothetical financing 

scenarios. The scenarios were chosen to illustrate a potential range of portfolio metric outcomes based on 

hypothetical issuance choices.

The scenarios are: 

1) “Coupons Constant”: Treasury maintains coupon, FRN, and TIPS auction sizes constant as of 

October 2023 and addresses any changes in financing needs by only increasing or decreasing T-bill 

auction sizes; 

2) “Bills Constant”: Treasury maintains T-bills aggregate supply constant at $5.5 trillion as of 

10/31/2023 and increases or decreases coupon, FRN, and TIPS auction sizes in response to 

financing needs in a manner that maintains current issuance proportions going forward;

3) “Prorated Bills and Coupons”: Treasury maintains T-bills share constant at 21% as of 10/31/2023 

and addresses any changes in financing needs by pro rata increasing or decreasing coupon, FRN, 

and TIPS auction sizes. 

Privately-held net marketable borrowing needs used in the projections section of these charts are proxied 

using median primary dealer estimates for FY24, FY25 & FY26 (see page 18). 
23

40

45

50

55

60

65

70

75

80

85

19801981198219831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017201820192020202120222023202420252026

Weighted Average Maturity (Months)

Calendar Year

Weighted Average Maturity of Marketable Debt Outstanding

Projection Historical Historical Average from 1980 to Present

Bills Constant Coupons Constant Prorated Bills and Coupons

61.0 months (Historical Average 

from 1980 to Present)

10/31/23

71.4 months
24

Consolidated WANRR Calculation* 

* Weighted Average Next Rate Reset (WANRR) is a “Weighted Average Maturity” metric that attempts to adjust for the floating 

rate aspect of some Treasury debt. The WANRR is the average time until the outstanding debt’s interest rate is set to a new 

interest rate. For bills and fixed rate notes and bonds, the next rate reset is equal to the maturity date.

In contrast, for floating rate obligations, the time between the next rate reset date or maturity date is examined and the shorter 

period is used in the calculation. 

The consolidated outstanding debt is defined as the private amount plus SOMA Treasury securities holdings less currency 

amount. In this calculation, SOMA Treasury holdings greater than the level of currency outstanding is treated as if it is a daily rate 

reset. 

40

45

50

55

60

65

70

75

80

85

1984198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017201820192020202120222023

Months

Calendar Year

 Private (ex SOMA) Total Consolidated
25

0%

5%

10%

15%

20%

25%

30%

35%

40%

19801981198219831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017201820192020202120222023202420252026

Calendar Year

Bills, TIPS & FRNs Outstanding as a Percent of Marketable Debt 

Outstanding

Projection Bills TIPS FRNs Bills Constant Coupons Constant Prorated Bills and Coupons

Bills Historical Average = 22.4%

Max 35.6%

10/31/23 

21%

Max 10.7%

10/31/23 

7.6%

10/31/23 

2.0%

Max 2.7%
26

20%

30%

40%

50%

60%

70%

80%

1980

1981

1982198319841985

1986198719881989

1990

19911992

19931994

19951996

199719981999

2000200120022003

2004

20052006

200720082009

2010201120122013

2014

201520162017

20182019

20202021

202220232024

20252026

Calendar Year

Treasury Maturity Profile

Projection Percent Maturing <=1 Year Percent Maturing <=3 Year

Bills Constant Coupons Constant Prorated Bills and Coupons

10/31/23 

53.5%

10/31/23 

32.9%
Section VI:

Select Demand Metrics

Bid-to-Cover Data, Investor Class Data, 

Direct & Primary Dealer Awards, and Foreign Demand
28

 1.50

 2.00

 2.50

 3.00

 3.50

 4.00

 4.50

 5.00

Jun-18

Sep-18

Nov-18

Jan-19

Apr-19

Jun-19

Aug-19

Nov-19

Jan-20

Mar-20

May-20

Aug-20

Oct-20

Dec-20

Mar-21

May-21

Jul-21

Oct-21

Dec-21

Feb-22

Apr-22

Jul-22

Sep-22

Nov-22

Feb-23

Apr-23

Jun-23

Sep-23

Bid-to-Cover Ratio

Bid-to-Cover Ratios for Treasury Bills

 4-Week (13-week moving average) 8-Week (13-week moving average) 13-Week (13-week moving average)

 17-Week (13-week moving average) 26-Week (13-week moving average) 52-Week (6-auction moving average)
29

 1.50

 2.00

 2.50

 3.00

 3.50

 4.00

 4.50

 5.00

Jun-18

Sep-18

Dec-18

Mar-19

Jun-19

Sep-19

Dec-19

Mar-20

Jun-20

Sep-20

Dec-20

Mar-21

Jun-21

Sep-21

Dec-21

Mar-22

Jun-22

Sep-22

Dec-22

Mar-23

Jun-23

Sep-23

Bid-to-Cover Ratio

Bid-to-Cover Ratios for FRNs

(6-Month Moving Average)
30

 1.50

 2.00

 2.50

 3.00

 3.50

 4.00

 4.50

 5.00

Jun-18

Sep-18

Nov-18

Jan-19

Apr-19

Jun-19

Aug-19

Nov-19

Jan-20

Mar-20

May-20

Aug-20

Oct-20

Dec-20

Mar-21

May-21

Jul-21

Oct-21

Dec-21

Feb-22

Apr-22

Jul-22

Sep-22

Nov-22

Feb-23

Apr-23

Jun-23

Sep-23

Bid-to-Cover Ratio

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

(6-Month Moving Average)

2-Year 3-Year 5-Year
31

 1.50

 2.00

 2.50

 3.00

 3.50

 4.00

 4.50

 5.00

Jun-18

Sep-18

Nov-18

Jan-19

Apr-19

Jun-19

Aug-19

Nov-19

Jan-20

Mar-20

May-20

Aug-20

Oct-20

Dec-20

Mar-21

May-21

Jul-21

Oct-21

Dec-21

Feb-22

Apr-22

Jul-22

Sep-22

Nov-22

Feb-23

Apr-23

Jun-23

Sep-23

Bid-to-Cover Ratio

Bid-to-Cover Ratios for 7-, 10-, 20-, and 30-Year 

Nominal Securities (6-Month Moving Average)

7-Year 10-Year 20-Year 30-Year
32

 1.50

 2.00

 2.50

 3.00

 3.50

 4.00

 4.50

 5.00

Jun-18

Sep-18

Nov-18

Jan-19

Apr-19

Jun-19

Aug-19

Nov-19

Jan-20

Mar-20

May-20

Aug-20

Oct-20

Dec-20

Mar-21

May-21

Jul-21

Oct-21

Dec-21

Feb-22

Apr-22

Jul-22

Sep-22

Nov-22

Feb-23

Apr-23

Jun-23

Sep-23

Bid-to-Cover Ratio

Bid-to-Cover Ratios for TIPS

 5-Year 10-Year (6-month moving average) 30-Year
33

Excludes SOMA add-ons. The “Other” category includes categories that are each less than 5%, which include Depository 

Institutions, Individuals, Pension and Insurance.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Jun-18

Sep-18

Dec-18

Mar-19

Jun-19

Sep-19

Dec-19

Mar-20

Jun-20

Sep-20

Dec-20

Mar-21

Jun-21

Sep-21

Dec-21

Mar-22

Jun-22

Sep-22

Dec-22

Mar-23

Jun-23

Sep-23

13-week moving average

Percent Awarded in Bill Auctions by Investor Class 

(13-Week Moving Average)

 Other Dealers and Brokers Investment Funds Foreign & International Other
34

Excludes SOMA add-ons. The “Other” category includes categories that are each less than 5%, which include Depository 

Institutions, Individuals, Pension and Insurance.

0%

10%

20%

30%

40%

50%

60%

70%

80%

Jun-18

Sep-18

Dec-18

Mar-19

Jun-19

Sep-19

Dec-19

Mar-20

Jun-20

Sep-20

Dec-20

Mar-21

Jun-21

Sep-21

Dec-21

Mar-22

Jun-22

Sep-22

Dec-22

Mar-23

Jun-23

Sep-23

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 & International Other
35

Excludes SOMA add-ons. The “Other” category includes categories that are each less than 5%, which include Depository 

Institutions, Individuals, Pension and Insurance.

0%

10%

20%

30%

40%

50%

60%

70%

80%

Jun-18

Sep-18

Dec-18

Mar-19

Jun-19

Sep-19

Dec-19

Mar-20

Jun-20

Sep-20

Dec-20

Mar-21

Jun-21

Sep-21

Dec-21

Mar-22

Jun-22

Sep-22

Dec-22

Mar-23

Jun-23

Sep-23

6-month moving average

Percent Awarded in 7-, 10-, 20-, 30-Year Nominal Security Auctions by 

Investor Class (6-Month Moving Average)

 Other Dealers and Brokers Investment Funds Foreign & International Other
36

Excludes SOMA add-ons. The “Other” category includes categories that are each less than 5%, which include Depository 

Institutions, Individuals, Pension and Insurance.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Jun-18

Sep-18

Dec-18

Mar-19

Jun-19

Sep-19

Dec-19

Mar-20

Jun-20

Sep-20

Dec-20

Mar-21

Jun-21

Sep-21

Dec-21

Mar-22

Jun-22

Sep-22

Dec-22

Mar-23

Jun-23

Sep-23

6-month moving average

Percent Awarded in TIPS Auctions by Investor Class

(6-Month Moving Average)

 Other Dealers and Brokers Investment Funds Foreign & International Other
37

Excludes SOMA add-ons. The “Other” category includes categories that are each less than 5%, which include Depository 

Institutions, Individuals, Pension and Insurance.

0%

10%

20%

30%

40%

50%

60%

70%

Jun-18

Sep-18

Dec-18

Mar-19

Jun-19

Sep-19

Dec-19

Mar-20

Jun-20

Sep-20

Dec-20

Mar-21

Jun-21

Sep-21

Dec-21

Mar-22

Jun-22

Sep-22

Dec-22

Mar-23

Jun-23

Sep-23

6-month moving average

Percent Awarded in FRN Auctions by Investor Class

(6-Month Moving Average)

 Other Dealers and Brokers Investment Funds Foreign & International Other
38

Competitive Amount Awarded excludes SOMA add-ons. 

0%

10%

20%

30%

40%

50%

60%

70%

Jun-18

Sep-18

Dec-18

Mar-19

Jun-19

Sep-19

Dec-19

Mar-20

Jun-20

Sep-20

Dec-20

Mar-21

Jun-21

Sep-21

Dec-21

Mar-22

Jun-22

Sep-22

Dec-22

Mar-23

Jun-23

Sep-23

% of Total Competitive Amount Awarded

Primary Dealer Awards at Auction

4/8/13/17/26-Week (13-week moving average) 52-Week (6-month moving average)

2/3/5 (6-month moving average) 7/10/20/30 (6-month moving average)

TIPS (6-month moving average) FRN (6-month moving average)
39

Competitive Amount Awarded excludes SOMA add-ons. 

0%

5%

10%

15%

20%

25%

Jun-18

Sep-18

Dec-18

Mar-19

Jun-19

Sep-19

Dec-19

Mar-20

Jun-20

Sep-20

Dec-20

Mar-21

Jun-21

Sep-21

Dec-21

Mar-22

Jun-22

Sep-22

Dec-22

Mar-23

Jun-23

Sep-23

% of Total Competitive Amount Awarded

Direct Bidder Awards at Auction

4/8/13/17/26-Week (13-week moving average) 52-Week (6-auction moving average)

2/3/5 (6-month moving average) 7/10/20/30 (6-month moving average)

TIPS (6-month moving average) FRN (6-month moving average)
40

Foreign includes both private sector and official institutions.

0

20

40

60

80

100

120

140

160

180

200

Dec-20

Jan-21

Feb-21

Mar-21

Apr-21

May-21

Jun-21

Jul-21

Aug-21

Sep-21

Oct-21

Nov-21

Dec-21

Jan-22

Feb-22

Mar-22

Apr-22

May-22

Jun-22

Jul-22

Aug-22

Sep-22

Oct-22

Nov-22

Dec-22

Jan-23

Feb-23

Mar-23

Apr-23

May-23

Jun-23

Jul-23

Aug-23

Sep-23

$ bn

Total Foreign Awards of Treasuries at Auction, $ billions

Bills 2/3/5 7/10/20/30 TIPS FRN
41

Source: Treasury International Capital (TIC) System as of August 2023.

For more information on foreign participation data, including more details about the TIC data shown here, please refer to Treasury 

Presentation to TBAC “Brief Overview of Key Data Sources on Foreign Participation in the U.S. Treasury Securities Market” at the

Treasury February 2019 Refunding.

Total Foreign Holdings

0%

10%

20%

30%

40%

50%

60%

0

1,000

2,000

3,000

4,000

5,000

6,000

2000200120022003200420052006200720082009201020112012201320142015201620172018201920202021202220232024

$ bn

Bills

Outstanding Foreign Holdings Foreign % (RHS)

08/31/23 

5,074

08/31/23 

20%

08/31/23 

1,036

10%

20%

30%

40%

50%

60%

70%

0

4,000

8,000

12,000

16,000

20,000

24,000

2000200120022003

2004

20052006

2007

20082009

20102011

2012201320142015201620172018201920202021202220232024

$ bn

Nominal Coupons, TIPS, and FRNs

Outstanding Foreign Holdings Foreign % (RHS)

08/31/23 

20,398

08/31/23 

33%

08/31/23 

6,671
VII. Appendix

42

Contents

A. Quarterly Tax Receipts Chart p. 42

B. Treasury Non-Marketable Borrowing p. 43

C. Budget Surplus and Deficits p. 44

D. Sources of Financing: Reconciliation of last quarter p. 45

E. Privately-Held Net Marketable Borrowing Definition and Calculation Example p. 46

F. Detailed Reconciliation of Various Borrowing Estimates p. 47

G. Various Historical Debt Service Cost Metrics p. 48

H. Various Historical Treasury Interest Rate Metrics p. 49

I. Projected Privately-Held Net Marketable Borrowing Table p. 50

J. Auction Statistics Tables p. 51-54
 (100%)

 (80%)

 (60%)

 (40%)

 (20%)

0%

20%

40%

60%

80%

100%

Jun-13

Sep-13

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

Sep-15

Dec-15

Mar-16

Jun-16

Sep-16

Dec-16

Mar-17

Jun-17

Sep-17

Dec-17

Mar-18

Jun-18

Sep-18

Dec-18

Mar-19

Jun-19

Sep-19

Dec-19

Mar-20

Jun-20

Sep-20

Dec-20

Mar-21

Jun-21

Sep-21

Dec-21

Mar-22

Jun-22

Sep-22

Dec-22

Mar-23

Jun-23

Sep-23

Year-over-Year % Change

Quarterly Tax Receipts

 Corporate Taxes Non-Withheld Taxes (incl SECA) Withheld Taxes (incl FICA)

43

Quarterly tax receipts for Q4 FY2020 reflect the adjustment of April and June 2020 tax deadlines to July 15th, 2020.

The spike for Corporate Taxes was 781% and the 

spike for Non-Withheld was 541% as of 

6/30/2021

The spike for Non-Withheld 

was 245% as of 9/30/2020
44

(40)

(30)

(20)

(10)

0

10

20

30

Q1-13Q2-13Q3-13Q4-13Q1-14Q2-14Q3-14Q4-14Q1-15Q2-15Q3-15Q4-15Q1-16Q2-16Q3-16Q4-16Q1-17Q2-17Q3-17Q4-17Q1-18Q2-18Q3-18Q4-18Q1-19Q2-19Q3-19Q4-19Q1-20Q2-20Q3-20Q4-20Q1-21Q2-21Q3-21Q4-21Q1-22Q2-22Q3-22Q4-22Q1-23Q2-23Q3-23Q4-23

$ bn

Fiscal Quarter

Treasury Net Nonmarketable Borrowing

 Foreign Series State and Local Govt. Series (SLGS) Savings Bonds
(17.5%)

(15.0%)

(12.5%)

(10.0%)

(7.5%)

(5.0%)

(2.5%)

0.0%

(3,500)

(3,000)

(2,500)

(2,000)

(1,500)

(1,000)

(500)

0

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

Deficit to GDP

$bn

Budget Surplus/Deficit*

OMB's MSR (Jul 23) Surplus/Deficit in $bn (LHS) CBO's Budget (Jun 23) Surplus/Deficit (LHS)

PD Survey (Oct 23) median estimates (LHS) OMB's MSR (Jul 23) Surplus/Deficit as a % of GDP (RHS)

CBO's Budget (Jun 23) Surplus/Deficit as a % of GDP (RHS)

*OMB’s projections are from OMB’s Table S-1 of “Mid-Session Review, Budget of The U.S. Government,” July 2023.

CBO’s projections are from Table 1 of “How the Fiscal Responsibility Act of 2023 Affects CBO’s Projections of Federal Debt ,” June 

2023. Table 1 of “How the Fiscal Responsibility Act of 2023 Affects CBO’s Projections of Federal Debt ,” June 2023. 

Projections

45
46

*By adjusting the change in cash balance, Treasury arrives at the net implied funding number. 

Net Bill Issuance 824 Security Gross Maturing Net Gross Maturing Net

Net Coupon Issuance 185 4-Week 975 885 90 3,214 3,094 120

Subtotal: Net Marketable Borrowing 1,010 8-Week 845 650 195 2,800 2,635 165

13-Week 875 779 96 3,133 2,948 185

Ending Cash Balance 657 17-Week 624 477 147 1,931 1,125 806

Beginning Cash Balance 402 26-Week 784 621 163 2,668 2,316 352

Subtotal: Change in Cash Balance 254 52-Week 120 102 18 466 442 24

CMBs

Net Implied Funding for FY23 Q4* 755 6-Week 725 510 215 870 510 360

CMBs 0 100 (100) 813 1,138 (325)

Bill Subtotal 4,947 4,123 824 15,894 14,207 1,687

Security Gross Maturing Net Gross Maturing Net

2-Year FRN 72 80 (8) 276 314 (38)

2-Year 87 115 (28) 465 566 (101)

3-Year 126 108 18 486 334 152

5-Year 89 43 46 476 209 267

7-Year 71 51 20 386 297 89

10-Year 105 41 64 402 174 228

20-Year 28 0 28 145 0 145

30-Year 61 7 54 232 14 218

5-Year TIPS 0 0 0 80 43 37

10-Year TIPS 32 49 (17) 94 98 (5)

30-Year TIPS 8 0 8 17 0 17

Coupon Subtotal 678 493 185 3,058 2,049 1,009

Total 5,626 4,616 1,010 18,952 16,256 2,696

Sources of Privately-Held Financing in FY23 Q4

July - September 2023 Fiscal Year-to-Date

Coupon Issuance Coupon Issuance

July - September 2023 July - September 2023 Fiscal Year-to-Date

Bill Issuance Bill Issuance
47

Privately-Held Net Marketable Borrowing 

Definition and Calculation Example

• Actual deficits are sourced from the Monthly Treasury Statement.

• Actual change in cash balance is sourced from the Daily Treasury Statement. Change in cash balance = cash balance 

of Sept 30, 2022 - cash balance of Sept 30, 2021

• Other Means of Financing include cash flows associated with federal credit programs, such as those related to 

student loans and loans to small businesses.

• Privately-Held Net Marketable Borrowing = Total Net Marketable Borrowing + SOMA Redemption

• SOMA redemption is the amount that the Federal Reserve redeems securities that Treasury has to replace with 

privately-held marketable borrowing. Actual SOMA redemptions amounts is from the Sources and Uses 

Reconciliation Table.

• Actual Privately-Held Net Marketable Borrowing is from the Sources and Uses Reconciliation Table.

FY 2022 Actual Deficits and

Privately-Held Net Marketable Borrowing, in $ billions

FY 2022 Deficit 1,375

FY 2022 + Change in Cash Balance 421

FY 2022 + Other Means of Financing (e.g. Direct Loans) -125

FY 2022 = Total Net Marketable Borrowing 1,671

FY 2022 + SOMA Redemption 150

FY 2022 = Privately-Held Net Marketable Borrowing 1,821

FY 2022 Actual
48

• *All privately-held net marketable borrowing estimates of are “normalized” using:

• 1) the median Primary Dealer’s estimates for SOMA redemptions, and 

• 2) PD’s median end of fiscal year 2024 cash balance of $733 billion, held constant in out years. 

• OMB projections are using estimates are from Table S-1 of “Mid-Session Review, Budget of The U.S. Government,” July 2023. Adjusted to reflect 

the latest assumptions about student loans.

• CBO projections are using estimates are from Table 1 & 2 of “How the Fiscal Responsibility Act of 2023 Affects CBO’s Projections of Federal Debt 

,” June 2023.

FY 2024-2026 Deficits and Privately-Held Net Marketable Borrowing Estimates, in $ billions

25th Median 75th

FY 2024 Deficit 1,688 1,800 1,807 1,877 1,501

FY 2025 Deficit 1,725 1,850 1,900 1,698 1,649

FY 2026 Deficit 1,728 1,800 1,950 1,561 1,586

FY 2024 Change in Cash Balance 33 76 93 0 0

FY 2025 Change in Cash Balance 10 17 0 0 0

FY 2026 Change in Cash Balance 0 0 50 0 0

FY 2024 Total Net Marketable Borrowing 1,664 1,551

FY 2025 Total Net Marketable Borrowing 1,817 1,746

FY 2026 Total Net Marketable Borrowing 1,683 1,676

FY 2024 SOMA Redemption 540 630 720

FY 2025 SOMA Redemption 0 0 180

FY 2026 SOMA Redemption 0 0 0

FY 2024 Privately-Held Net Marketable Borrowing* 2,305 2,500 2,560 2,735 2,257

FY 2025 Privately-Held Net Marketable Borrowing* 1,815 1,950 2,050 1,849 1,763

FY 2026 Privately-Held Net Marketable Borrowing* 1,750 1,898 1,994 1,696 1,676

Estimates as of: Oct-23 Jul-23 Jun-23

Primary Dealer OMB CBO
49

Source: https://fiscaldata.treasury.gov/datasets

The average interest rates for total marketable debt do not include the Treasury Inflation-Indexed Securities and the Treasury Floating Rate 

Notes. However, they include securities from Federal Financing Bank. The average interest rates in the chart are as of corresponding fiscal 

year-end-dates. 

0

0.5

1

1.5

2

2.5

3

3.5

4

0

100

200

300

400

500

600

700

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Percent

$ bn

Fiscal Year

Historical Marketable Treasury Debt Service Cost

Interest + Discount/Premiums Average Interest Rate (RHS) Interest/GDP (RHS)
50

Various Historical Treasury Interest Rate Metrics

Source: Bloomberg

1

2

3

4

5

6

0 10 20 30

Percent

Years to Maturity

Treasury Nominal Yield Curve 

as of specified dates 

9/30/2023 6/30/2023 3/31/2023

-1

0

1

2

3

4

0 10 20 30

Percent

Years to Maturity

Treasury Real Yield Curve 

as of specified dates 

9/30/2023 6/30/2023 3/31/2023

0

100

2Y 5Y 10Y 30Y

Bps

Since

Nominal Yield Changes in Selected Tenors

Through the end of 09/30/23

3/31/2023 6/30/2023

-180

-160

-140

-120

-100

-80

-60

-40

-20

0

20

40

60

80

Mar-23 May-23 Jul-23 Sep-23

Bps

Bills-SOFR OIS spreads 

Through the end of 09/30/23 

1m 2m 3m 4m 6m 12m

0

100

5Y 10Y 30Y

Bps

Since

Real Yield Changes in Selected Tenors

Through the end of 09/30/23

3/31/2023 6/30/2023

2

2.5

Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23

Bps

Breakevens

Through the end of 09/30/23

5Y 10Y 30Y
51

Projected Privately-Held Net Marketable Borrowing 

Assuming Private Coupon Issuance & Total Bills Outstanding 

Remain Constant as of 10/31/2023*

*Projections reflect only SOMA rollovers at auction of principal payments of Treasury securities. No adjustments are made 

for open-market outright purchases and subsequent rollovers.

Fiscal 

Year Bills 2/3/5 7/10/20/30 TIPS FRN

Historical/Projected 

Net Borrowing 

Capacity

2019 137 498 534 51 59 1,280 

2020 2,652 538 724 46 55 4,015 

2021 (1,315) 1,260 1,328 55 92 1,420 

2022 (53) 744 1,027 61 42 1,821 

2023 1,689 319 680 50 (38) 2,699 

2024 197 328 793 76 14 1,409 

2025 0 232 812 11 20 1,075 

2026 0 15 808 29 0 851 

2027 0 68 691 11 0 770 

2028 0 96 375 (11) 0 460 

2029 0 3 495 (8) 0 490 

2030 0 0 616 7 0 623 

2031 0 0 411 (5) 0 406 

2032 0 0 435 (30) 0 406 

2033 0 0 447 (22) 0 425 
52

*Approximated using prices at settlement and includes both competitive and non-competitive awards.

Issue Settle Date Stop Out 

Rate (%)

Bid-toCover 

Ratio

Competitive 

Awards ($bn)

% Primary 

Dealer % Direct % Indirect

NonCompetitive 

Awards ($bn)

SOMA "Add 

Ons" ($bn)

10-Year 

Equivalent 

($bn)*

4-Week 7/11/2023 5.150 2.54 65.9 50.7 1.9 47.3 4.1 0.8 0.6

4-Week 7/18/2023 5.210 2.79 63.9 40.1 4.6 55.4 6.1 0.8 0.6

4-Week 7/25/2023 5.255 2.66 65.4 41.1 6.1 52.8 4.6 0.8 0.6

4-Week 8/1/2023 5.275 3.18 64.1 36.1 3.7 60.2 5.9 0.9 0.6

4-Week 8/8/2023 5.275 2.80 65.3 42.3 4.7 53.0 4.7 0.9 0.6

4-Week 8/15/2023 5.280 2.62 70.5 44.1 6.5 49.5 4.5 0.9 0.7

4-Week 8/22/2023 5.280 2.67 75.7 42.3 3.2 54.5 4.3 0.9 0.7

4-Week 8/29/2023 5.285 2.89 75.7 36.1 2.4 61.5 4.3 1.0 0.7

4-Week 9/5/2023 5.280 2.95 75.1 37.2 1.7 61.1 4.9 0.5 0.7

4-Week 9/12/2023 5.280 2.70 75.5 40.1 2.4 57.5 4.5 0.5 0.7

4-Week 9/19/2023 5.285 2.66 75.5 50.6 3.5 45.9 4.5 0.5 0.7

4-Week 9/26/2023 5.280 2.80 75.7 42.1 4.8 53.1 4.3 0.5 0.7

4-Week 10/3/2023 5.290 2.95 80.1 38.8 4.1 57.1 4.9 0.7 0.8

8-Week 7/11/2023 5.200 2.88 58.6 32.0 1.9 66.1 1.4 0.7 1.1

8-Week 7/18/2023 5.230 2.87 57.9 39.7 1.8 58.5 2.1 0.7 1.1

8-Week 7/25/2023 5.255 2.99 58.8 35.5 3.9 60.7 1.2 0.7 1.1

8-Week 8/1/2023 5.285 2.86 56.8 41.2 4.3 54.4 3.2 0.8 1.1

8-Week 8/8/2023 5.285 2.77 58.5 41.9 4.6 53.6 1.5 0.8 1.1

8-Week 8/15/2023 5.280 2.96 63.5 39.6 2.5 57.9 1.5 0.8 1.2

8-Week 8/22/2023 5.280 2.89 68.6 38.0 9.9 52.1 1.4 0.8 1.3

8-Week 8/29/2023 5.290 2.82 68.5 37.2 2.1 60.7 1.5 0.8 1.3

8-Week 9/5/2023 5.290 2.77 68.7 37.6 2.3 60.1 1.3 0.4 1.3

8-Week 9/12/2023 5.290 2.79 68.7 45.6 2.9 51.5 1.3 0.5 1.3

8-Week 9/19/2023 5.295 2.77 68.6 41.6 3.5 54.9 1.4 0.4 1.3

8-Week 9/26/2023 5.300 2.58 68.7 48.8 5.3 45.9 1.3 0.5 1.3

8-Week 10/3/2023 5.330 2.59 73.6 37.6 4.4 58.0 1.4 0.6 1.4

Bills
53

*Approximated using prices at settlement and includes both competitive and non-competitive awards.

Issue Settle Date Stop Out Rate 

(%)

Bid-toCover 

Ratio

Competitive 

Awards ($bn)

% Primary 

Dealer % Direct % Indirect

NonCompetitive 

Awards ($bn)

SOMA 

"Add Ons" 

($bn)

10-Year 

Equivalent 

($bn)*

13-Week 7/6/2023 5.230 3.00 62.7 37.1 2.3 60.6 2.3 5.5 2.1

13-Week 7/13/2023 5.250 3.12 61.9 38.3 2.8 58.8 3.1 5.1 2.1

13-Week 7/20/2023 5.250 3.11 62.4 34.6 4.6 60.8 2.6 5.2 2.1

13-Week 7/27/2023 5.270 2.92 60.7 38.3 3.4 58.3 4.3 5.0 2.1

13-Week 8/3/2023 5.280 2.93 62.3 38.5 5.7 55.8 2.7 8.1 2.2

13-Week 8/10/2023 5.290 2.83 64.2 37.0 4.9 58.1 2.8 6.4 2.2

13-Week 8/17/2023 5.295 3.12 66.3 38.1 4.6 57.3 2.7 7.1 2.3

13-Week 8/24/2023 5.300 2.96 66.6 38.9 3.9 57.2 2.4 5.7 2.3

13-Week 8/31/2023 5.340 3.04 66.7 46.0 2.9 51.1 2.3 5.3 2.2

13-Week 9/7/2023 5.315 2.94 66.7 45.1 4.6 50.3 2.3 1.9 2.1

13-Week 9/14/2023 5.315 2.98 66.7 36.8 3.7 59.5 2.3 1.9 2.1

13-Week 9/21/2023 5.315 2.86 66.4 42.0 5.6 52.4 2.6 0.7 2.1

13-Week 9/28/2023 5.330 2.77 66.6 42.6 5.6 51.8 2.4 2.7 2.2

17-Week 7/11/2023 5.250 3.31 44.3 37.2 2.4 60.4 1.7 0.5 1.8

17-Week 7/18/2023 5.260 3.13 44.7 39.1 3.6 57.2 1.3 0.5 1.8

17-Week 7/25/2023 5.270 3.29 45.3 38.1 3.8 58.0 0.7 0.5 1.8

17-Week 8/1/2023 5.300 2.99 45.2 41.3 6.3 52.5 0.8 0.6 1.8

17-Week 8/8/2023 5.300 3.21 45.2 39.3 4.8 55.9 0.8 0.6 1.8

17-Week 8/15/2023 5.310 3.19 47.1 40.1 5.2 54.7 0.9 0.6 1.9

17-Week 8/22/2023 5.305 3.02 49.1 48.5 3.4 48.1 0.9 0.6 2.0

17-Week 8/29/2023 5.315 3.01 49.3 41.8 4.2 54.0 0.7 0.6 2.0

17-Week 9/5/2023 5.330 3.12 47.3 40.3 5.7 54.0 2.7 0.3 2.0

17-Week 9/12/2023 5.335 2.98 47.4 38.8 3.6 57.6 2.6 0.3 2.0

17-Week 9/19/2023 5.330 2.95 47.3 47.6 3.9 48.5 2.7 0.3 2.0

17-Week 9/26/2023 5.340 2.83 47.7 46.6 4.7 48.7 2.3 0.3 2.0

17-Week 10/3/2023 5.345 3.18 49.4 38.7 3.4 57.9 2.6 0.4 2.1

Bills (cont.)
*Approximated using prices at settlement and includes both competitive and non-competitive awards. 54

Issue Settle Date Stop Out Rate 

(%)

Bid-toCover 

Ratio

Competitive 

Awards ($bn)

% Primary 

Dealer % Direct % Indirect

NonCompetitive 

Awards ($bn)

SOMA 

"Add Ons" 

($bn)

10-Year 

Equivalent 

($bn)*

26-Week 7/6/2023 5.260 3.02 54.0 31.5 1.5 67.0 4.0 4.9 3.7

26-Week 7/13/2023 5.270 2.93 55.1 32.3 2.4 65.2 2.9 4.6 3.7

26-Week 7/20/2023 5.250 3.05 55.4 29.0 2.5 68.4 2.6 4.6 3.7

26-Week 7/27/2023 5.270 2.89 55.6 33.5 3.1 63.5 2.4 4.5 3.7

26-Week 8/3/2023 5.270 2.95 55.1 26.1 2.9 71.0 2.9 7.2 3.9

26-Week 8/10/2023 5.265 2.92 57.1 31.1 5.0 63.9 2.9 5.7 3.9

26-Week 8/17/2023 5.290 2.78 59.1 36.1 4.9 59.0 2.9 6.4 4.1

26-Week 8/24/2023 5.295 2.95 59.2 35.1 2.8 62.1 2.8 5.1 4.0

26-Week 8/31/2023 5.350 3.17 59.1 32.2 2.3 65.6 2.9 4.7 4.0

26-Week 9/7/2023 5.300 3.02 59.5 34.3 2.6 63.1 2.5 1.7 3.8

26-Week 9/14/2023 5.300 3.15 57.4 27.0 2.4 70.5 4.6 1.7 3.8

26-Week 9/21/2023 5.300 3.05 59.4 34.4 5.1 60.5 2.6 0.7 3.8

26-Week 9/28/2023 5.315 2.91 59.5 36.0 5.1 58.9 2.5 2.4 3.9

52-Week 7/13/2023 5.130 2.88 36.4 29.4 2.3 68.3 1.6 3.0 4.8

52-Week 8/10/2023 5.060 2.97 38.1 37.1 3.2 59.7 1.9 3.8 5.2

52-Week 9/7/2023 5.120 3.14 40.6 30.7 2.0 67.3 1.4 1.1 5.2

6-Week CMB 7/6/2023 5.170 2.73 49.9 47.3 1.9 50.8 0.1 0.0 0.7

6-Week CMB 7/13/2023 5.210 2.81 49.8 42.0 2.2 55.8 0.2 0.0 0.7

6-Week CMB 7/20/2023 5.240 3.19 49.8 42.5 5.0 52.5 0.2 0.0 0.7

6-Week CMB 7/27/2023 5.275 3.53 49.8 38.5 8.1 53.5 0.2 0.0 0.7

6-Week CMB 8/3/2023 5.280 3.24 49.8 53.6 7.2 39.2 0.3 0.0 0.7

6-Week CMB 8/10/2023 5.275 2.95 54.8 49.7 5.4 44.9 0.2 0.0 0.8

6-Week CMB 8/17/2023 5.285 3.01 59.8 41.2 3.9 54.9 0.2 0.0 0.8

6-Week CMB 8/24/2023 5.280 3.27 59.8 37.0 2.5 60.4 0.2 0.0 0.8

6-Week CMB 8/31/2023 5.290 2.81 59.8 41.1 2.6 56.3 0.2 0.0 0.8

6-Week CMB 9/7/2023 5.285 3.04 59.9 41.1 1.8 57.1 0.1 0.0 0.8

6-Week CMB 9/14/2023 5.285 3.04 59.8 37.2 2.4 60.3 0.2 0.0 0.8

6-Week CMB 9/21/2023 5.285 3.10 59.8 43.6 3.1 53.3 0.2 0.0 0.8

6-Week CMB 9/28/2023 5.290 2.89 59.8 30.4 4.0 65.6 0.2 0.0 0.8

Bills (cont.)
Issue Settle Date Stop Out 

Rate (%)

Bid-toCover 

Ratio

Competitive 

Awards ($bn)

% Primary 

Dealer % Direct % Indirect

NonCompetitive 

Awards ($bn)

SOMA 

"Add 

Ons" 

($bn)

10-Year 

Equivalent 

($bn)**

10-Year TIPS 7/31/2023 1.495 2.51 16.8 1.5 12.7 85.8 0.2 0.0 18.8

10-Year TIPS 9/29/2023 2.094 2.44 14.9 6.8 21.9 71.3 0.1 0.0 16.6

30-Year TIPS 8/31/2023 1.970 2.42 8.0 4.3 19.6 76.2 0.0 0.8 24.9

TIPS

55

*FRNs are reported on discount margin basis. 

**Approximated using prices at settlement and includes both competitive and non-competitive awards. 

For TIPS 10-Year equivalent, a constant auction BEI is used as the inflation assumption.

Issue Settle Date Stop Out 

Rate (%)*

Bid-toCover 

Ratio

Competitive 

Awards ($bn)

% Primary 

Dealer % Direct % Indirect

NonCompetitive 

Awards ($bn)

SOMA 

"Add 

Ons" 

($bn)

10-Year 

Equivalent 

($bn)**

2-Year 7/31/2023 4.823 2.78 41.3 13.8 20.8 65.4 0.7 0.0 9.6

2-Year 8/31/2023 5.024 2.94 44.1 15.0 20.0 65.0 0.9 4.7 11.5

2-Year 10/2/2023 5.085 2.73 47.2 14.0 21.0 65.0 0.8 0.0 11.2

3-Year 7/17/2023 4.534 2.88 39.6 10.8 19.8 69.4 0.4 0.0 13.5

3-Year 8/15/2023 4.398 2.90 41.5 10.3 15.7 74.0 0.5 15.7 19.6

3-Year 9/15/2023 4.660 2.75 43.7 20.3 22.1 57.7 0.3 0.0 15.0

5-Year 7/31/2023 4.170 2.60 42.9 13.5 22.1 64.4 0.1 0.0 23.4

5-Year 8/31/2023 4.400 2.54 45.8 13.8 18.3 67.9 0.2 4.8 27.7

5-Year 10/2/2023 4.659 2.52 48.8 11.2 17.6 71.1 0.2 0.0 26.8

7-Year 7/31/2023 4.087 2.48 35.0 14.3 15.9 69.8 0.0 0.0 25.8

7-Year 8/31/2023 4.212 2.66 35.9 9.8 15.0 75.3 0.1 3.7 29.3

7-Year 10/2/2023 4.673 2.47 36.9 14.6 19.9 65.5 0.1 0.0 27.1

10-Year 7/17/2023 3.857 2.53 32.0 12.4 19.9 67.7 0.0 0.0 32.0

10-Year 8/15/2023 3.999 2.56 37.9 9.5 18.3 72.2 0.1 14.2 52.2

10-Year 9/15/2023 4.289 2.52 34.9 13.8 19.9 66.3 0.1 0.0 35.0

20-Year 7/31/2023 4.036 2.68 11.8 9.6 21.7 68.8 0.2 0.0 19.6

20-Year 8/31/2023 4.499 2.56 15.9 11.4 20.2 68.4 0.1 1.7 28.4

20-Year 10/2/2023 4.592 2.74 12.9 9.3 25.4 65.4 0.1 0.0 20.5

30-Year 7/17/2023 3.910 2.43 18.0 10.9 20.1 69.0 0.0 0.0 38.8

30-Year 8/15/2023 4.189 2.42 23.0 12.5 19.6 67.8 0.0 8.6 65.5

30-Year 9/15/2023 4.345 2.46 20.0 15.8 19.7 64.5 0.0 0.0 41.4

2-Year FRN 7/31/2023 0.125 2.58 23.8 46.7 0.0 53.3 0.2 0.0 0.0

2-Year FRN 8/25/2023 0.165 2.42 24.0 62.3 1.7 36.0 0.0 0.0 0.0

2-Year FRN 9/29/2023 0.180 3.42 24.0 32.6 0.4 67.0 0.0 0.0 0.0

Nominal Coupons & FRNs
Explaining the recent market moves 

across the Treasury yield curve

Treasury Borrowing Advisory Committee

October 31, 2023

1
Please discuss the Committee’s views on the factors (and their relative importance) driving market moves across the 

Treasury yield curve over the last quarter. Can the moves be explained mostly by fundamental factors or are there 

technical or positioning factors that Treasury should be aware of? To what extent have Treasury supply and demand 

dynamics been a factor? What are expectations for yields going forward? In the Committee’s discussion, please 

include relevant data and analysis that supports or discounts the relative importance of factors being discussed.

2
Executive summary

Overview of recent market moves

Framework for long-term yields

Analysis of yield component moves

Government supply

Technical factors

Why didn’t term premia reprice earlier

Expectations for yields

Conclusion

Table of Contents

3
• Treasury yields have risen sharply since the start of Q3, particularly in longer maturities. As of October 20th, the

30y yield has increased 124 bps, compared to 20 bps for the 2y.

• The Fed hiked the policy rate by 25 bps over this period (largely as expected), and market pricing for the fed funds

rate at the end of 2025 rose roughly 75 bps, from approximately 3.35% to 4.10%, reflecting expectations that the

Fed will keep policy restrictive for longer.

• Yield increases have been largest in longer maturities and far-forward rates (e.g., 5y5y has risen ~150 bps),

indicating that revised views on long-run neutral and term premia have played a bigger role.

• While there was likely some reassessment of long-run neutral amid ongoing economic resilience, models and

surveys suggest real term premia accounts for most of the move.

• Term premia has risen from historically low levels; increasing treasury supply likely contributed to the repricing.

• While technical factors may have amplified the moves, they likely did not play a major role.

• Looking ahead, continued normalization in term premia and increases in neutral rate expectations could drive

higher yields; in contrast, a material growth slowdown would lead to lower yields.

Executive Summary

4
Executive summary

Overview of recent market moves

Framework for long-term yields

Analysis of yield component moves

Government supply

Technical factors

Why didn’t term premia reprice earlier

Expectations for yields

Conclusion

Table of Contents

5
• From the start of the third quarter to October 20th, Treasury yields rose between 20 bps and 124 bps across

maturities with the yield curve substantially steeper.

• Higher real yields accounted for most of the rise in nominal yields. Breakeven inflation rates have increased

moderately for 5y and longer maturities, while only increasing slightly in the front end.

Overview of yield curve changes since start of Q3

Source: Bloomberg Finance LP 6

20

73

96

112

121 124

0

20

40

60

80

100

120

140

2Y 5Y 7Y 10Y 20Y 30Y

bp

Constant maturity yield changes

(6/30/23 to 10/20/23)

0

20

40

60

80

100

120

140

2Y 5Y 10Y 30Y

bp Real yield and inflation breakeven changes

(6/30/23 to 10/20/23)

Real yield Inflation breakeven
• Treasuries cheapened relative to swaps across most maturities, which accounted for 6-10 bps of the yield

increases. However, the moves in swap yields and Treasury yields were not significantly different for the

purposes of the charge.

• In markets more broadly, risk assets were initially resilient to higher yields but began to show impact in late Q3.

Over recent weeks, as yields continued to rise, risk asset levels slipped further.

Overview of yield curve changes since start of Q3

Source: Bloomberg Finance LP 7

0

2

4

6

8

10

12

5Y 7Y 10Y 20Y 30Y

bp

Swap spread changes

(6/30/23 to 10/20/23)

SOFR/FF (funding spread) UST/SOFR (swap spread)

92

94

96

98

100

102

104

Jun-23 Jul-23 Aug-23 Sep-23 Oct-23

Rebased indices (6/30/23 = 100)

S&P 500 IG Index HY Index

Start of Q3
Executive summary

Overview of recent market moves

Framework for long-term yields

Analysis of yield component moves

Government supply

Technical factors

Why didn’t term premia reprice earlier

Expectations for yields

Conclusion

Table of Contents

8
• The standard decomposition breaks term yields into short-rate expectations and term premia.

• Short-rate expectations can be decomposed further into expectations for the neutral rate and expectations for policy restraint relative to

neutral (i.e., the cycle), leaving yields as a function of:

• Expectations for the Fed policy cycle

• Expectations for the long-run neutral nominal rate (i.e., r* + inflation expectations)

• Term premia

• Technical factors like liquidity, positioning, and convexity flows can lead to short-run deviations from fundamentals.

• In terms of underlying drivers for each of the components:

• Fed policy cycle – driven by expectations for inflation, the labor market, and the Fed’s reaction function.

• Neutral rate – related to expectations for structural factors (e.g., productivity, demographic shifts), but views on neutral should be

informed by how the economy responds to delivered Fed tightening.

• Term premia – in theory related to factors such as inflation/nominal short-rate uncertainty, the correlation of bonds with risk assets,

changes in net supply to private price-sensitive investors, and cyclical factors. However, anything unrelated to short-rate expectations

that shifts bond demand should flow through to term premia.

Framework for long-term yields

9
• Each of these fundamental components in the Framework for long-term yields is unobservable and so decomposing yields requires a term

structure model or survey data on expectations.

• Both models and surveys suggest that since the start of Q3 the bulk of the yield move has been in term premia (relevant surveys are only

available through mid-September), but they differ in degree and in the current levels of term premia (TP).

• Because breakeven inflation rates were little changed, the TP move seems likely to have been in real TP.

Decomposing yields in practice

Source: NY Fed, Federal Reserve, Bloomberg Finance LP 10

-40

-20

0

20

40

60

80

100

120

140

ACM KW SPD/SMP*

bp

10y yield change decomposition for TP models and surveys (6/30/23 

to 10/20/23)

TP Exp long-run rate Exp Fed cycle Residual Total yield change

*The June and Sep SPD/SMP (New York Fed surveys) were used to generate the decomp, so

the chart employs the 10y yield change between Jun 5 and Sep 11 for SPD/SMP. The

model decomps use 5y5y short-rate expectations as the expected long-run rate.

-200

-150

-100

-50

0

50

100

150

200

250

2015 2017 2019 2021 2023

bp Level of 10y TP from models and surveys

SPD/SMP Model: ACM Model: KW

Date of latest survey
Executive summary

Overview of recent market moves

Framework for long-term yields

Analysis of yield component moves

Government supply

Technical factors

Why didn’t term premia reprice earlier

Expectations for yields

Conclusion

Table of Contents

11
Fed policy cycle: Resilient data led investors to price out 2024-2025 rate cuts; 

the Fed also upgraded its forecasts

Source: Citi, Bloomberg Finance LP, Federal Reserve 12

3

3.5

4

4.5

5

5.5

6

2023 2024 2025

%

SEP median FFR forecast

June September

2

2.2

2.4

2.6

2.8

3

3.2

3.4

2023 2024 2025

%

SEP median PCE forecast

June September

3.4

3.6

3.8

4

4.2

4.4

4.6

2023 2024 2025

%

SEP median unemployment forecast

June September

0

0.5

1

1.5

2

2.5

2023 2024 2025

%

SEP median real GDP growth forecast

June September

-2.50

-2.25

-2.00

-1.75

-1.50

-1.25

-1.00

-0.75

-0.50

-40

-20

0

20

40

60

80

100

Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23

Index Economic data index and Dec23/Dec25 SOFR curve %

Citi Surprise Index (LHS) SFRZ3-Z5 spread (RHS)
• Most of the increase in 2y yields in Q3 occurred around economic data releases, while less than 20% of the

increases in 10y to 30y yield occurred in those windows.

• This is consistent with front-end yields being driven by the economic outlook and near-term Fed policy

expectations and limited pass-through into longer-term yields.

Fed policy cycle: Shifts in Fed expectations have had only limited passthrough into longer-term yields

Source: Bloomberg Finance LP, TBAC member calculations 13

Economic releases include: Employment situation reports, CPI, 

PPI, PCE, GDP, ISM manufacturing index, retail sales, durable 

goods, ADP employment report, unemployment, industrial 

production.

0

10

20

30

40

50

60

70

80

2y 3y 5y 7y 10y 20y 30y

bp

Contributions of data releases to Q3 yield moves

Cumulative yield change within [-5mins, +15mins] of data release Cumulative yield change in rest of Q3
• Various ways of estimating r* suggest it has

risen since pre-Covid.

• Available measures suggest r* also increased

over recent months, though as noted earlier

the shift in expectations for r* measured by

models and surveys was modest.

• Uncertainty around r* may have also

increased, which would be reflected in

higher term premia.

r* expectations: Higher than pre-Covid with further potential increases in Q3

Source: Federal Reserve, Haver Analytics, Deutsche Bank 14

-2

-1

0

1

2

3

4

2005 2010 2015 2020

%

High Frequency Estimate Macro Model Estimate

Market Estimate Bond-Equity Correlation Estimate

Lubik-Matthes Estimate HLW Estimate

LW Estimate Average of estimates
Term premia started Q3 at levels that looked depressed versus both history 

and fundamentals

15

• Term premia had fallen to very depressed levels as measured

relative to several traditional model-based factors including

inflation uncertainty, interest rate volatility, and bond-equity

correlations.

• It is likely that some powerful and entrenched factors helped

drive term premia to very low levels pre-Covid. More

recently, however, newly-formed factors may have helped

catalyze term premia’s recovery.

Source: Federal Reserve, BLS, Bloomberg, Haver Analytics

50

60

70

80

90

100

110

120

130

140

-2

-1

0

1

2

3

4

02 04 06 08 10 12 14 16 18 20 22

% 10y TP and interest rate vol bp

ACM 10y TP (LHS) 5y5y rate vol (RHS)

-0.75

-0.50

-0.25

0.00

0.25

0.50

0.75

1.00

0 2 4 6 8 10 12 14 16

Correlation (10y 

UST yield, S&P)

12m Core CPI Inflation (%)

Trailing 12m Core CPI vs. subsequent 52w equity price–bond 

yield correlation

Last observation = 4.1%

Note: A negative value in this chart 

indicates a positive correlation between 

bond and equity returns

2002 - 2021

R2 = 0.8801

2022 - 2023

-2 R2 = 0.0807

-1

0

1

2

3

4

40 60 80 100 120 140

ACM 10y TP (%)

5y5y implied vol (bp)

The correlation between TP and vol had broken down since 

2022
Factor that may have been pressuring term premia lower: QE was 

(obviously) bond buying

16

• The share of G4 sovereign bonds held by private,

price-sensitive investors fell between 2010 and 2022

from 55% to 40%, primarily due to QE. This is true in

the US and other advanced economies.

• This dynamic reversed in 2022 with a sharp pivot from

QE to QT in the U.S.

• Since then, price-sensitive investors have increasingly

set the clearing level for Treasuries.

• The smooth transmission of ON RRP balances into

banks over the past year, along with improved

prospects of a soft-landing, suggest that Fed balance

sheet runoff could go on for longer, a sentiment

echoed by Chair Powell in the July post-meeting press

conference. A longer period of runoff increases the

amount of privately-held borrowing by the Treasury.

Source: Federal Reserve, Treasury, Haver Analytics, Deutsche Bank

-150

-100

-50

0

50

100

150

200

250

300

35

40

45

50

55

60

2004 2007 2010 2013 2016 2019 2022 2025

% Global free float (LHS) ACM 10y TP (RHS) bp

The global free-float variable is 

constructed on holdings of government 

bonds by price-sensitive private-sector 

investors as a share of total outstanding 

across the US, EA, UK and Japan.

The definition of price-sensitive investors for this charge includes all parties except for domestic 

central banks, insurance companies and pension funds, and the foreign official sector.
Factor that may have been pressuring term premia lower: Money market reform and 

near-zero yields resulted in longer-duration bond buying

17

• Over 2010-2020, savers chose bank deposits over money market funds, likely due to two factors: (a) yields near zero disincentivized the time and effort to switch, and (b) increased

regulation of money market funds reduced their attractiveness.

• Banks hold longer-duration assets against bank deposits than money market funds hold against their cash. Savers choosing banks over money market funds likely caused more bond buying

than if savers had allocated to money market funds.

• That dynamic changed starting post-Covid as (a) non-zero yields caused a significant difference in expected returns on money market funds and bank deposits, and (b) the cost of regulatory

changes had largely been internalized by money market fund users. Money market demand for UST has increased recently also perhaps due to recent Tbill cheapening.

• Relative to the pre-2010 trend, this could have resulted in banks buying additional Treasuries against $1-2trn of excess deposits instead of $1-2trn in money market fund buying of repo or

short-dated assets.

Source: Federal Reserve, Investment Company Institute

-1000

-500

0

500

1000

1500

2000

2500

-200

-100

0

100

200

300

400

500

Sep-13 Sep-15 Sep-17 Sep-19 Sep-21 Sep-23

$bn $bn Change in bank deposits and debt securities holdings

(13-week rolling)

Treasury and non-MBS agency securities (LHS) Deposits (RHS)

-1.5

-0.5

0.5

1.5

2.5

3.5

20%

25%

30%

35%

40%

1994 2001 2008 2015 2022

MMF AUM / (MMF AUM + deposits) %

ACM 10y TP (rhs)

2

2.5

3

3.5

4

4.5

5

5.5

6

6

7

8

9

10

11

12

13

14

15

16

17

18

19

08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23

$trn Bank deposits vs money market fund assets $trn

Deposits (LHS) MMF assets (RHS)

Start of Fed hiking cycle

March 

banking 

stress
Factor that may have been pressuring term premia lower: Competitive pressures 

and regulation on pension funds caused bond buying

18

• Some combination of plan constituent changes,

competitive pressures and regulation caused defined

benefit (DB) pensions to hold more bonds and less

stocks.

• Defined benefit plans had moved from 60/40 (in favor

of stocks) to 50/50.

• This shift is estimated to have caused pensions to own

$540bn more bonds than implied by the 60/40 static

weighting.

• Looking at the time series, we see that dynamic may

have slowed already.

Source: Federal Reserve; Note: Pension assets calculated for bonds and equities only, all other assets excluded

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

50%

52%

54%

56%

58%

60%

62%

64%

10 11 12 13 14 15 16 17 18 19 20 21 22 23

%

Defined Benefit Pensions: Equities vs Fixed Income

Equity weighting ACM 10y TP (RHS)

60/40 stocks to bonds weighting
New factor pressuring term premia higher: Banks reducing bonds and 

shortening the average life of holdings

19

• After a period of increased investment, banks have been shrinking their portfolio of Treasuries and MBS since the start of Fed rate hikes.

• Banks have reduced their MBS holdings, which have longer average life, at a faster pace than their Treasury holdings, suggesting shedding of duration.

• Anecdotally, banks are shortening the average maturity of their securities after scrutiny on unrealized losses especially exacerbated by bank failures in March

2023.

Source: FDIC, TBAC member calculations

4.8

5.0

5.2

5.4

5.6

5.8

6.0

6.2

6.4

6.6

08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Year

Estimated average maturity of government non-MBS debt 

securities held by US banks

-200

-150

-100

-50

0

50

100

150

200

250

300

Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23

$bn

Change in bank debt securities holdings (QoQ)

Agency securities (MBS) Treasuries
New factor pressuring term premia higher: International investor holdings declining 

as a share of USTs outstanding

Source: Federal Reserve, Treasury, Japan Ministry of Finance, Bloomberg Finance LP 20

• Sponsorship by the foreign official

sector has not kept pace with the

growth of the Treasury market over

the last decade.

• This may be driven by diversification

concerns as well as relative value

considerations.

• For Japanese private-sector investors,

several headwinds may create

persistent weak demand for

Treasuries:

• JGB yields are becoming more attractive

with the BOJ’s likely exit from YCC,

reducing the need for Japanese investors

to invest abroad.

• A strong dollar deters Japanese investors

from buying USD assets.

• For investors who own assets on a hedged

basis (such as lifers), hedging costs have

risen above absolute yields, thus making

hedged-Treasuries a negative returning

asset.

0%

10%

20%

30%

40%

50%

00 02 04 06 08 10 12 14 16 18 20 22

Foreign official holdings of US Treasuries

Foreign official Bonds Bills

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

2016 2017 2018 2019 2020 2021 2022 2023

% 10y JGB yield

BOJ relaxes YCC band 

(28-July)

60

80

100

120

140

-90 160

-60

-30

0

30

60

90

120

04 06 08 10 12 14 16 18 20 22

$bn per 

quarter

Japan's exchange rate vs investment in US debt

Japanese investment in US LT sovereign bonds (LHS)

USD/JPY (RHS inverted)

USD/JPY

0

1

2

3

4

5

6

7

8

00 02 04 06 08 10 12 14 16 18 20 22

% Hedging cost vs Treasury yield

USDJPY 12 month hedging cost 10y Treasury yield
New factor pressuring term premia higher: Households (including hedge funds) 

increasingly set the marginal price for Treasuries since QT

Source: Federal Reserve 21

• Based on data through Q2, real money

investors have either been net sellers or

buyers of a relatively small portion of

Treasury supply over the four quarters

through Q2, leaving the bulk of new

supply to non-traditional investors.

• The household sector, a category that

includes domestic hedge funds,

accounted for 70% of the private net

supply in H2 2022 and H1 2023.

• While some of the household sector's

positions reflect bond-futures basis

positions, the residual non-basis positions

indicate that a combination of both actual

households and hedge funds are the

marginal buyer of Treasuries.

-50%

-25%

0%

25%

50%

75%

100%

-1000

-500

0

500

1000

1500

2000

Fed Banks States and

Local

Governments

Insurance Pensions Money Market

Funds and

Mutual Funds

Foreigners Others

(Dealers, GSEs,

etc)

Households

(Incl. Hedge

Funds)

As a share of Treasury's 

$bn private borrowing

Net transaction in Treasuries by investor types since start of QT

Q3-2022 Q4-2022 Q1-2023 Q2-2023
Executive summary

Overview of recent market moves

Framework for long-term yields

Analysis of yield component moves

Government supply

Technical factors

Why didn’t term premia reprice earlier

Expectations for yields

Conclusion

Table of Contents

22
Large and ongoing deficits have fed expectations of significant supply 

increases

23

• The US fiscal deficit is at the top end of its range outside of recession / periods of high unemployment.

• A very high deficit despite a strong economy puts focus on government borrowing.

Source: Treasury, CBO, Bureau of Labor Statistics

2020

2021

2022

2023

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12%

Deficit as % of GDP 

(1956-2023)

Unemployment rate (1956-2023, as of Sep 30)

US Deficit versus Unemployment rate

-25%

-20%

-15%

-10%

-5%

0%

5%

1954 1961 1968 1975 1982 1989 1996 2003 2010 2017 2024 2031

US Deficit

Deficit as % of GDP (trailing 4 quarters) CBO projection
Yields rose following Treasury borrowing estimate and supply 

announcements during Q3

24

• In August, the Treasury announced larger-than-expected

borrowing estimates and sizable coupon issuance

increases across maturities.

• 10y yields rose sharply after each announcement. The

immediate increase following the auction size

announcement was bigger, despite changes that were

largely in line with primary dealer expectations and TBAC

recommendations.

• The Fitch rating downgrade on August 1st may have

added to overall negative sentiment, but yields did not

move notably on the announcement.

Source: Deutsche Bank

3.90

3.95

4.00

4.05

4.10

4.15

4.20

4.25

31 Jul

00:00

31 Jul

08:00

31 Jul

16:00

1 Aug

04:00

1 Aug

12:00

2 Aug

00:00

2 Aug

08:00

2 Aug

16:00

3 Aug

04:00

3 Aug

12:00

4 Aug

00:00

%

OTR 10y Treasury yield

Treasury 

releases 

borrowing 

estimates for 

Q3 and Q4

Treasury 

announces coupon 

size increases for 

Aug-Oct quarter Fitch 

downgrades US 

long-term debt 

to AA+
Coupon auction sizes are increasing, creating more supply pressure for next 

year

25

• Since June 1, the Treasury has issued $1.5 trillion in T-bills to meet its borrowing needs, including to

rebuild the TGA from a very low level.

• As of the end of September, bill’s share of marketable debt was 20.4%, above the TBAC’s

recommended range of 15-20%.

• Bills are projected to remain above 20% until Q2 2025 under reasonable assumptions.

• However, TBAC has indicated that it is comfortable with bills exceeding that range for some

time.

• In August, the Treasury stated that “further gradual increases [to coupon auction sizes] will likely be

necessary in future quarters”.

• If Treasury were to keep the same pattern of increases announced in August for the next two

quarters, auction sizes in most benchmark tenors would rise to a new record high. This would lift the

duration of Treasury supply substantially higher next year as well.

Source: Treasury, Haver Analytics, TBAC member calculations

-50

0

50

100

150

200

250

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

$bn Coupon issuance in 10y note equivalents (6mma)

Issuance

Issuance less Fed purchases

Projection

10%

13%

15%

18%

20%

23%

25%

28%

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

T-bill's share as percentage of marketable debt

Actual

Constant nominal coupons

Keep announced increases for 2 more quarters

Range recommended by TBAC

Assumes $1.75tn deficit financing for each of CY24 and CY25, $450bn 

SOMA redemptions in CY24, and $750bn TGA through end of CY25

0

10

20

30

40

50

60

70

80

2Y 3Y 5Y 7Y 10Y 20Y 30Y

$bn

Coupon auction sizes by tenor

Previous peak Current Keep announced increases for 2 more quarters

Sizes shown for 10y, 20y and 

30y are average across the 

CUSIP cycle
Narrowing swap spreads may again indicate supply/demand imbalance from 

increased Treasury issuance

26

• Long-dated swap spreads correlated highly with deficits pre-2008: long-dated spreads narrowed (Treasuries cheapened to swaps) as

deficits went up.

• That correlation broke down from 2008-2021, perhaps due to factors discussed over the previous slides.

• While it is early to judge, the correlation may be returning; swap spread-narrowing in Q3, while relatively small, indicates deficits could be

having a market impact. This narrowing overwhelmed any widening pressures that may have come from mortgage duration extension. It

bears watching to see if the correlation continues to hold as it did pre-2008.

Source: CBO, Bloomberg Finance LP

-100

-50

0

50

100

150

-20%

-16%

-12%

-8%

-4%

0%

4%

1995 2000 2005 2010 2015 2020

bp

Deficit/GDP vs long-date swap spreads

Deficit/GDP (LHS) 30y Libor spread (RHS)

-6

-5

-4

-3

-2

-1

0

1

2

7/1/23 8/1/23 9/1/23 10/1/23

bp

Change in 30y SOFR swap spreads August refunding

Treasury borrowing 

estimate update (31-Jul)
Executive summary

Overview of recent market moves

Framework for long-term yields

Analysis of yield component moves

Government supply

Technical factors

Why didn’t term premia reprice earlier

Expectations for yields

Conclusion

Table of Contents

27
Market liquidity has generally been good, supporting the view that the yield 

rise was more driven by fundamental repricing

Source: Deutsche Bank 28

• Since the start of Q3, Treasury spline errors have declined,

order book depth has improved, and bid-ask spreads for onthe-run Treasuries have remained stable.

2

3

4

5

6

Sep-22 Nov-22 Jan-23 Mar-23 May-23 Jul-23 Sep-23

Treasury spline errors decreased through Q3

Treasury Aggregate

Root mean square error 

from spline (bps) 

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

Jul-22 Oct-22 Jan-23 Apr-23 Jul-23 Oct-23

5d average bid-ask spread of on-the-run Treasuries

2y 5y 10y

32nds of a point

0

5

10

15

20

25

30

35

Jul-22 Oct-22 Jan-23 Apr-23 Jul-23 Oct-23

5d average order book depth for on-the-run Treasuries

2y 5y 10y

Millions, USD
CTA position changes may have amplified the market sell off, mortgage 

related convexity hedging was not a primary driver

Source: Soc Gen CTA Index, TBAC member calculations 29

• Momentum strategies (CTAs) shortened their duration beta to the lowest level in Q3 as rates began to rise. Their position

changes may have added to the market sell-off.

• Mortgage duration (Bloomberg MBS Index) extended from 6.07 years at the end of June to 6.48 years on October 20, raising

the specter of convexity hedging. However, relative to prior history, this extension is modest.

0

1

2

3

4

5

6

7

2010 2012 2014 2016 2018 2020 2022

year

MBS index duration

-1.4

-1.2

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

Q2 2021Q3 2021Q4 2021Q1 2022Q2 2022Q3 2022Q4 2022Q1 2023Q2 2023Q3 2023

beta

CTA duration exposure implied by returns index
Treasury basis trade possibly counteracted some of the cheapening pressure 

on Treasuries

Source: CFTC, Federal Reserve Board, FICC 30

• The Treasury cash-futures basis trade creates

demand for cash Treasuries as relative value

market participants sell futures and buy bonds.

In doing so, they facilitate asset managers

adding duration exposure via futures.

• The ongoing attractiveness of the basis trade

and market data such as leveraged fund futures

short positions suggest there are growing

volumes of Treasury duration being held off

balance sheet in futures.

• With hedge funds willingly providing liquidity to

the buyers of futures, the functioning of the

basis market may have helped counteract some

of the cheapening pressure on Treasuries.

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2015 2016 2017 2018 2019 2020 2021 2022 2023

$bn

Indicators of Treasury Basis Positions

Leveraged Fund Futures Shorts Hedge Fund Treasuries

SOFR Volume Sponsored Volume
Executive summary

Overview of recent market moves

Framework for long-term yields

Analysis of yield component moves

Government supply

Technical factors

Why didn’t term premia reprice earlier

Expectations for yields

Conclusion

Table of Contents

31
How do we square the substantial rise in yields with an apparently moderate-size 

shift in supply expectations?

32

• We have seen similar dynamics previously where the market moved significantly on information that was seemingly wellknown and led to only modest adjustments in underlying fundamental expectations.

• The 2013 taper tantrum may be the most apt comparison. Chair Bernanke’s remarks in May 2013 that the pace of Fed

purchases could at some point slow catalyzed a sharp rise in longer-term rates (the 5y5y rate was up more than 100 bps

between April and July), while the NY Fed’s surveys showed little contemporaneous shift in expectations for the fed funds rate

or SOMA holdings.

Source: Bloomberg Finance LP, NY Fed

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0-0.25% 0.25-0.5% 0.5-1% 1-.5% 1.5-2% 2-2.5% >2.5%

prob

Fed funds rate

SPD avg PDF for the FFR at end-2015

Apr 2013 Jul 2013

0

0.1

0.2

0.3

0.4

0.5

0.6

<2.5 2.5-3 3-3.5 3.5-4 4-4.5 4.5-5 >5

prob

SOMA holdings ($tn)

SPD avg PDF for SOMA holdings at end-2014

Apr 2013 Jul 2013
Executive summary

Overview of recent market moves

Framework for long-term yields

Analysis of yield component moves

Government supply

Technical factors

Why didn’t term premia reprice earlier

Expectations for yields

Conclusion

Table of Contents

33
• The framework helps to dimension potential moves in yields from here; while

directional statements on the outlook are straightforward, magnitudes are

highly uncertain.

• Fed policy cycle expectations

• A shift to fully price the median SEP dots through 2025 could, all else

equal, boost the 10y yield roughly 10 bps. A further shift up in nearterm policy rate expectations should also in itself have a limited

direct effect on long-term yields.

• On the other hand, a mild recession would boost expectations for

earlier Fed rate cuts, lowering yields.

• Long-run neutral expectations

• It’s difficult to gauge current neutral rate expectations. The SEP and

surveys place it at 2.5% (nominal); term structure models put it much

higher at around 4.4%.

• An increase in neutral expectations from here should in theory passthrough close to 1:1 to the 10y.

• Uncertainty around r* may be an important factor for TP.

Yield outlook: Expectations components

Source: Bloomberg Finance LP, Federal Reserve, NY Fed 34

3.5

4

4.5

5

5.5

6

Dec-22 Jun-23 Dec-23 Jun-24 Dec-24 Jun-25 Dec-25

%

Fed funds rate paths: SEP and market

SEP-implied OIS

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

May-10 Jun-12 Jul-14 Aug-16 Sep-18 Oct-20 Nov-22

% Long-run neutral rate expectations

SPD/SMP Model: ACM Model: KW

Date of latest survey

Note: For SPD/SMP uses expectations for the longer-run fed funds rate. For models uses the 

expectations component of the 5y5y rate.
• Models similar to those used in early empirical work on

LSAPs* find significant supply effects when estimated on data

through the mid-2010s. Some specifications imply 10y TP

should be as much as 150 bps above current levels.

• However, estimates on samples extending to 2020 find

smaller supply effects; many still forecast that TP should be

higher but by more moderate amounts.

• It is possible the models omit significant factors correlated

with supply post-2014, producing downwardly-biased

estimates of supply effects; some of those factors were

reviewed above.

• The outlook for TP depends both on the magnitude of supply

effects and the importance of other factors and whether their

effects depressing TP are fading.

• One potentially conservative benchmark might be that term

premia return to pre-2014 averages. That would imply an

increase in KW and ACM 10y TP of roughly 55-110 bps from

current levels.

Yield outlook: Term premia

Source: Federal Reserve; *E.g., Gagnon, Raskin, Remache and Sack (2011) 35

-1.5

-1

-0.5

0

0.5

1

1.5

2

2.5

3

3.5

1994 1997 2000 2003 2006 2009 2012 2015 2018 2021

% 10y TP

KW ACM

Average: '94-'14
Executive summary

Overview of recent market moves

Framework for long-term yields

Analysis of yield component moves

Government supply

Technical factors

Why didn’t term premia reprice earlier

Expectations for yields

Conclusion

Table of Contents

36
• Treasury yields have risen sharply since the start of Q3, particularly in longer maturities. The Fed hiked policy

rates as expected over the period and the market took out some cuts priced by 2025.

• However, models and surveys suggest that most of the yield increase was due to an increase in term premia.

• Term premia entered the quarter at historically low levels, although those historically low levels had persisted for

many years. We argue that several of the fundamental factors which may have led to depressed term premia have

abated (QE, pension fund asset reallocation, caps on money market fund assets) and new factors have emerged

(decreasing fraction of UST supply going to overseas holders, banks shortening duration, households taking

largest portion of UST issuance).

• We believe the term premia repricing may have been prompted by the market acceptance of increasing UST

coupon supply.

• While technical factors may have amplified the moves, they likely did not play a major role.

• Some metrics suggest term premia have space to increase further.

Conclusion

37
Outlook for demand for US Treasuries

October 2023

Please discuss: 

1. The Committee’s views on how structural demand for Treasury securities will evolve in the near- and 

medium-term across different products and tenors.

2. What factors (e.g., the economic and monetary policy outlook) should Treasury consider when evaluating 

domestic and foreign demand from different investor classes over the next one to two years?

3. How should these views inform Treasury’s future issuance decisions?

1

2

3
1

Executive Summary

1 How will structural demand for Treasury securities evolve in the near- and medium-term across different products and tenors?

• In recent years, demand base for U.S. Treasuries has shifted toward more price sensitive investors

• While some of these shifts are cyclical in nature, there may also be structural factors at play 

• Over the medium term, demand from mutual funds, pension funds, and money market funds is likely to increase, while that from 

banks and foreign investors may continue to face headwinds 

• Despite shifts in demand, Treasury auctions continue to be well subscribed – average auction tails have not risen, even as volatility of 

tails has increased in line with market volatility

What factors (e.g., the economic and monetary policy outlook) should the Treasury consider when evaluating domestic and foreign 

demand from different investor classes over the next one to two years?

• Global macroeconomic outlook: A recession would likely result in increased demand from most investor bases. However, a softlanding scenario may result in a continuation of current demand patterns 

• Assessment of structural nature of higher term premium: Term premium has recently risen, driven by multiple factors including 

borrowing needs of ~5%+ of GDP. A structurally higher term premium might result in recent trends persisting and demand not 

reverting to pre-pandemic proportions

• Synchronization of global monetary policy: Global economies have had varied responses to synchronous tightening in monetary 

policy, with the US economy remaining resilient. Subsequent asynchronous global monetary policy changes are likely to have 

implications for the demand base through FX and global portfolio allocation channels

How should these views inform Treasury’s future issuance decisions?

• Recommend increasing flexibility of issuance strategy in light of a shifting demand base and higher term premium. Specifically:

o Increase 2y, 5y, and 10y auction sizes greater than pro rata to skew issuance toward tenors less impacted by the rise in term

premium and those that benefit from greater liquidity premium 

o Increase TIPs issuance, especially in intermediate maturities, to reflect positive inflation risk premium 

• Recommendations for further study:

o Evaluate patterns of inflows into MMFs, and other T-bills investor bases, under various economic scenarios, and analyze their 

allocation decisions into T-bills to inform optimal decision making around medium-term divergence from long-term T-bills band

o Reassess how nimbly, and within what range, should the committee recommend the Treasury change the medium term expected 

interest cost to roll-over risk trade-off 

o Reevaluate the products and processes, presented in the TBAC charge “Potential Innovations in Treasury Products and Tools” 

January 2019, to attract new and existing investors

2

3
2

How will structural demand for Treasuries evolve in 

near and medium term?

1
Change in 

marketable 

Treasuries 

out, ex-Fed, 

$B

Households Banks Insurance Private 

Pension MMF Mutual Funds, ETF Foreign Others1

H1 2023 1,281 53% -6% 2% 11% 14% 5% 24% -3%

2022 1,394 45% 2% -1% -3% -33% -8% -18% 118%

Previous 

easing (Q1 

2019-21)

4,166 -13% 20% 0% 3% 20% 13% 32% 25%

2015-2018 

hike 3,136 18% 14% 2% 9% 16% 14% 5% 22%

Q1 2009-Q4 

2018 7,947 13% 11% 2% 6% 4% 14% 38% 12%

Q2’23 

holdings, 

out, ex-Fed

20,070 11% 9% 2% 5% 6% 9% 38% 19%

 (2,000)

 (1,000)

 -

 1,000

 2,000

 3,000

2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026

4Q change in outstanding, ex-Fed, 

$bn

T-bills Coupon Treasuries Total

Source: Federal Reserve, Macrobond

3

Increase in supply in H1’23 was absorbed by a broad cross-section of private sector demand

Trends in demand for Treasuries show evolution toward more price 

sensitive investors

Private investors have absorbed a significant increase in net supply 

in a rising rate environment

Source: Macrobond

1) Others category includes non-financial corporates, State and Local government ex-SLGS, GSE and statistical discrepancy

2) “Households” category includes domestic hedge funds and personal trusts

1

• Over the previous four quarters, marketable debt 

outstanding, adjusted for Federal Reserve holdings, 

increased by more than $2trillion, ~3x the average in 

the prior decade

• Private investors have absorbed this supply in an 

environment of considerable macroeconomic 

uncertainty and sharply rising interest rates

o Demand base has shifted toward more price 

sensitive buyers with “households”2 absorbing 

more than half of the net increase in outstanding

o Relative to 2022, demand for US Treasuries 

became more broad-based in H1’23. Pension 

funds, money market funds, mutual funds and 

foreign investors all absorbed a greater share 

o Banks displayed reduced demand – changing 

regulatory environment and risk management 

decisions likely played a role 

• Importantly, CBO and consensus forecasts over the 

medium term are for net supply of US Treasuries to 

remain at these relatively high levels

Projection
4

Source: CFTC, BNP Paribas, presenter’s calculation

The Fed displaces more price sensitive investors during QE. The 

latter increase their holdings in QT episodes

Source: Federal Reserve

1

Demand base has shifted toward more price sensitive buyers

-800

-600

-400

-200

0

200

-1000 400

-500

0

500

1000

1500

2000

2010 2012 2014 2016 2018 2020 2022

4Q change in household holding, $bn

Change in levered notional, $bn (inv)

TU FV TY UXY US WN Households , 4Q change (LHS)

• In recent years, Treasuries held by households have risen

• Since 2021, household holdings of Treasuries have 

increased by $1.7T – amounting to ~50% of the total 

increase in marketable debt outstanding, ex Fed 

o Households averaged 18% of total increase in 

marketable debt outstanding in the previous 2015-

2018 hiking cycle and 13% from 2009-2018 overall

• The increase by household investors correlates with 

buildup of levered net short notional positions, 

concentrated in the TU contract. This suggests that the 

increase in household positions are partially attributable to 

basis trades by levered (and more price sensitive) investors

• Increased household demand, together with the Fed not 

rolling over maturing securities, and lower demand from 

official foreign investors, indicates that the demand base 

may have shifted toward more price sensitive investors, 

contributing to a rise in term premium 

-300%

-200%

-100%

0%

100%

200%

300%

2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023

4q increase in coupon Treasuries at Fed, % of increase in cpn marketable debt

4q increase in household holdings, % of increase in cpn marketable debt

Household demand correlates with levered fund net notional 

position
5

...even as securities, as % of assets, have declined (as is typical in hiking 

cycles)

Source: Federal Reserve

Source: Federal Reserve

Asset Growth, 

yoy

Securities, % 

of assets

Treasuries, % 

of securities

Additional 

demand, $B

0.0% 22% 30% $0 

1.5% 21% 33% $100

3.0% 21% 35% $220

1.5% 23% 35% $350

0%

2%

4%

6%

8%

10%

12%

17%

19%

21%

23%

25%

27%

1985 1990 1995 2000 2005 2010 2015 2020

Securities, % of assets Fed Funds Rate (RHS)

1

While banks’ securities portfolios have shrunk, their allocation to Treasuries has increased

Recent trends

• Treasuries outstanding grew by $1.3T ex Fed, In H1’23, 

however, those held by banks declined by ~$100B

• Weakened bank demand is likely driven by:

o Slowing asset growth: Total assets of commercial 

banks were largely unchanged over the past year -

compared with ~2.5% in the previous hiking cycle 

o Shrinking securities portfolio: With sharp rise in 

interest rates and underperformance of MBS 

assets, banks actively shrunk their securities 

portfolio as a percentage of their assets -- This 

pattern is typical in hiking cycles

• Even as securities share of assets has shrunk, allocation 

to Treasuries within the securities portfolio has 

increased, from 20% in 2017 to 30% currently

Outlook for demand

• Banks may continue to reduce allocation to securities. 

However, Basel 3 Endgame may encourage switches out 

of GSE MBS into UST/GNMA, due to differing capital 

treatment

• Table below outlines the potential sensitivity of these 

trends on Treasuries demand

10%

20%

30%

40%

2010 2012 2014 2016 2018 2020 2022

Treasuries, % of securities portfolio

Large Banks Small & Medium Banks Total (incl. Foreign banks)

Assumes changes in asset growth, declining share of securities as a 

portion on assets (in line with prior hiking cycles), and continued growth 

in allocation of Treasuries holdings within securities portfolios by banks

Treasuries are a greater allocation within banks’ securities portfolio...
6

Source: Bloomberg, Macrobond

Source: ICI, Macrobond

Allocation to T-bills in government MMFs has increased recently, 

with further room to rise 

0%

10%

20%

30%

40%

50%

60%

70%

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Allocation to T-bills in Gov MMFs

1

Recent T-bills cheapening vs OIS has made them attractive to money market funds

Amid the sharpest hiking cycle in decades, inflows into Government 

MMFs have surged

16%

 $2,000

 $2,500

 $3,000

 $3,500

 $4,000

 $4,500

 $5,000

-20%

0%

20%

40%

60%

80%

100%

120%

2018 2019 2020 2021 2022 2023 2024

$bn

6m growth annualized Taxable Government MMF, assets (RHS)

1) As of end of September, 0.17% of the ~$6trn in MMFs assets were under the 25% daily liquid assets requirements and 2.5% were under the 50% weekly liquid assets requirements 

Recent trends

• Demand for US Treasuries from money market funds 

has increased this year, driven by an increase in inflows 

and Treasuries valuations cheapening relative to OIS

• Government and prime MMF assets have increased 

~$700B and ~$250B YTD

o Government MMF holdings of Treasuries 

increased $160B in H1’23, and have increased an 

additional $300B as T-bill issuance ramped up 

post Q2 debt ceiling crisis 

• For much of 2021-22, MMFs substituted T-bills with 

Treasury repo. The recent buying of T-bills has not come 

entirely at the expense of Treasury repo and reflects 

allocation of incoming capital into T-bills 

Outlook for demand 

• T-bills allocation in government MMFs averaged 30% -

40% from 2013 to 2019, increased to ~60% in the 

pandemic, subsequently declined to 20% amid rich 

valuations, and is now back to 30% with potential to rise

• With investors attracted by high T-bill yields relative to 

longer end of the Treasury curve, inflows into MMFs are 

likely to remain strong

o A 5% annual increase in MMF assets and an 

increase in allocation to T-bills to 35% translates 

to ~$150B in new annual demand for T-bills

• Recent changes adopted by the SEC to increase the 

minimum liquidity requirements for MMFs may be a 

marginal1tailwind for T-bills demand
Source: Bloomberg

Source: Bloomberg, calculations

Foreign demand is absorbing a smaller proportion of net issuance in 

recent years than was true previously

-100%

-50%

0%

50%

100%

150%

200%

250%

2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023

4q increase in foreign holdings, as % 

of inceease in marketable debt, ex Fed

Coupon Treasuries

0

1

2

3

4

5

6

7

8

-4

-2

0

2

4

6

8

10

12

1988 1993 1998 2003 2008 2013 2018

%

%

JPY 10y Hedged US 10y (rolling 3m) Fed funds rate (RHS) Hiking cycles 

1

Foreign investors reversed the 2022 trend, but official demand likely faces structural headwinds

As is typical in hiking cycles, higher FX hedging costs lower the hedged 

Treasury yields to foreign currency funded buyers Recent trends 

• Increase in foreign investor Treasury holdings accounted 

for ~25% of the increase in total outstanding in H1

• This was notable for two reasons:

1. The increase represented a turnaround from 

2022 when foreign investors were net sellers 

2. The increase represented was despite 

prohibitively expensive costs of hedging FX risk, 

suggesting some of the purchases might not be 

FX hedged and potentially includes purchases 

by offshore HFs in basis trades or otherwise

• Flows from Japanese investors in 2023 are on pace to be 

one of the strongest year since 2013, despite yields of 

US Treasuries looking significantly lower than those of 

JGBs on a partially hedged basis

Outlook for demand 

• As the end of the current hiking cycle comes into view, 

the headwinds from high hedging costs will diminish and 

may drive greater demand for US Treasuries

o In the previous hiking cycle, foreign investors 

accounted for ~5% of the increase in Treasuries 

outstanding before increasing to ~30% when the 

cycle ended 

• Despite this potential cyclical boost, foreign demand for 

Treasuries may face structural challenges due to 

reduced pace of international FX reserve growth

o Foreign demand, on a structural basis, appears to 

have settled at a level lower, as a percentage of 

outstanding, than in 2009-15

o Foreign investors are unlikely to absorb ~50% of 

issuance as they did in that period

Hiking cycles 

7
8

Mutual funds1 have allocated more to Treasuries, in line with increase in 

the share of Treasuries in US Agg index

Source: ICI, Macrobond

Source: Bloomberg

-10%

0%

10%

20%

30%

40%

50%

60%

-36 -30 -24 -18 -12 -6 0 6 12 18 24 30 36

Cumulative net new cash flow, % of 

starting assets

Months from end of hiking cycle

Feb-95 May-00 Jun-06 Dec-18 Current

1

Mutual fund demand to largely reflect AUM growth and index composition

Recent trends 

• Mutual fund demand for Treasuries was tepid in 2023, 

accounting for 5% (down from 12-15% historically) of 

the increase in marketable debt outstanding, ex-Fed

• The soft demand is in line with expectations given the 

negative net new cash flows in bond funds in 2022 and 

in the first half of 2023

• Lower demand is likely a function of negative 

investment returns in fixed income and the lack of 

correlation benefit to risk assets that Treasuries 

provided during the sharpest hiking cycle in decades 

Outlook for demand

• Near-term flows will continue to be dictated by 

economic scenarios. Historically, bond funds experience 

outflows during hiking cycles and inflows subsequently

• Structurally, share of Treasuries outstanding held by 

mutual funds has risen steadily over the past 20 years, 

reflecting the increasing weight of Treasuries in the 

benchmark indices 

o Currently, Treasuries are ~41% of the index – this 

could rise to ~43% by 2025

o ~$3.5T2($4.8T including categories that invest in 

international sectors) in assets in active and 

passive taxable bond funds and ETFs are 

benchmarked to the US Aggregate index or its 

subcomponents

o Together, a 1% increase in weight of Treasuries in 

the index could represent an additional demand 

of ~$40bn

Bond mutual funds tend to experience outflows in hiking cycles. Flows 

tend to pickup once the cycle ends

1) Includes fixed income and equity mutual funds and ETFs

2) Source: Morningstar 

10%

20%

30%

40%

50%

0%

4%

8%

12%

16%

2000 2003 2006 2009 2012 2015 2018 2021 2024

Mutual funds, % of outstanding, ex Fed (LHS)

Share of Treasuries in US Agg index (RHS)

Projection
9

Auction tails have worsened a little at the 10y sector but likely reflects 

a typical lack of auction concession in this sector

Source: Barclays

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

2008 2010 2013 2016 2019 2021 2024

2y auction tails, bp

Source: Barclays

1

Treasury auctions have been well subscribed and have performed adequately 

Auction performance has remained strong at the front end. Volatility 

of tails has gone up

Auction performance

• Despite evolving demand base over the past two years, 

Treasury auctions have performed well with respect to 

the WI yields 

• While the volatility of auction results has increased, the 

average “tail” at auctions has not. The increased 

volatility of auction tails is in line with the increase in 

yield volatility since 2021

• The exception to this pattern is 10y auctions but given 

the 10y's status as the bellwether point on the curve, it 

perhaps has different auction dynamics than other 

points on the curve

• In longer tenor auctions such as 20y and 30y, where 

auctions provide a more critical liquidity point for 

investors, tails have not shown an increase

• With more price sensitive investors becoming a larger 

share of the demand base, cheapening of Treasuries 

ahead of the supply and subsequent richening post 

auctions has become more prominent, but unevenly 

across different tenors

 (2.0)

 (1.0)

 -

 1.0

 2.0

 3.0

 4.0

2009 2011 2013 2015 2017 2019 2021 2023

6m moving average, bp

10y tail 20y tail 30y tail

Mar'23 auction 

post SVB rally
10

What factors should Treasury consider when 

evaluating domestic and foreign demand?

2
11

Consensus growth forecasts have continued to trend down, 

suggesting the possibility of higher deficits

Source: CBO

2

4

6

8

10

-15 12

-10

-5

0

5

1970 1980 1990 2000 2010 2020 2030

%

%

Budget deficit (-), % of GDP (LHS) CBO baseline projection

Unemployment rate, % (inv, RHS)

Source: Bloomberg

2

Factor 1: Evolution of global macroeconomic outlook

Large deficits have magnified the effects of a changed demand base

Current fiscal deficits are procyclical in nature and CBO projects them 

to remain high over the medium term

Cyclical and structural factors have contributed to the 

shifting demand base to more price sensitive investors:

Cyclical

• Private investors have absorbed supply in an 

environment of considerable economic uncertainty and 

sharply rising interest rates. These factors are likely to 

moderate over the medium term

Structural

• Deficits have historically moved in line with 

unemployment rate. However, recent fiscal policy has 

led to a divergence between deficits and 

unemployment. Deficits are structurally higher across 

economic scenarios, and could go higher in the event of 

a recession

o Under baseline CBO projections of 1.8%, 2.7% and 

2.4% real GDP growth over the next 3 years, 

deficits are likely to exceed 5% of GDP. 

o An economic contraction next year may further 

raise deficits as deficits typically rise 2-5% of GDP 

in recessions

• Decreasing securities allocation as percentage of bank 

assets and declining share of holdings by foreign 

investors are likely structural in nature

1.3%

1.8% 1.9%

2.4%

0.1%

0.6%

1.4%

1.8%

Q1 2024 Q2 2024 Q3 2024 Q4 2024

Outlook at start of 2023 Current outlook
12

Source: CBO

Source: Federal Reserve, Macrobond

-10%

0%

10%

20%

30%

40%

50%

60%

Households

Banks

Insurance

Pension

MMF

Mutual Funds

Median increase in holdings, as % of 

Foreign

increase in outstanding, ex-Fed (since 1990)

Recessions Non Recessions H1'23

Money market funds experience strong inflows in recessionary 

environments, driving increased demand for T-bills

Source: ICI

-20%

0%

20%

40%

60%

80%

100%

120%

-36 -30 -24 -18 -12 -6 0 6 12 18 24 30 36

Cumulative net new cash flow into 

taxable MMF, % of starting assets

Months from start of recession

May-00 Jun-06 Dec-18 Feb-20

2

Factor 1: Evolution of global macroeconomic outlook

Demand base is likely to evolve differently in different macroeconomic outlooks

Demand profile varies according to macroeconomic scenarios. Due to 

structural reasons, current profile might evolve differently

Evaluation the demand base across macroeconomic and 

monetary policy scenarios can be instructive: 

Should a recession occur: 

• The demand base broadens as Treasuries act as a 

flight to quality asset class, with diversifying 

properties for domestic and global portfolios

• MMFs experience strongly positive net new cash flow 

around / preceding the start of a recession, as 

investors seek capital preservation

• Comparison of the MMF fund flows to those of bond 

funds show a strong preference for MMFs in 

recessionary environments 

• During monetary policy easing, banks tend to 

increase their allocations to securities overall, and 

increase Treasuries as a percentage of securities held

Should a soft landing or “higher for longer” scenario be 

realized:

• A greater share of the borrowing needs may have to 

be financed domestically than historically

• Macroeconomic stability and higher return 

expectations are needed to drive inflows into mutual 

funds. In this environment, mutual funds may absorb 

a greater share of Treasuries than today

• Household investors are also likely to maintain a 

greater share of demand in this environment
13

Source: Bloomberg, calculations

2

Factor 2: Assessment of structural nature of higher term premium:

Several factors have driven term premium higher and may not revert equally

• Large borrowing needs have been a key driver of the 

rise in term premium. However, several other factors 

have also contributed. These factors may revert only 

to varying degrees over the medium term

Drivers of higher term premium

• Macroeconomic volatility:

o Three years after the pandemic, macroeconomic 

data continues to be volatile. Surprise indices 

however are far less volatile now, indicating that 

forecasters have adjusted to the higher 

macroeconomic volatility, and it is reflected in 

term premium

o Macroeconomic data volatility is likely to subside 

over the medium term

• Global monetary policy

o Over the past year, 5y5y nominal Treasury yields 

moved with expected near-term Fed tightening 

o However, over the past quarter longer term rates 

including 5y5y have risen, likely due to increased 

issuance expectations, changes in BOJ’s Yield 

Curve Control (YCC) policy, and other factors. 

While the former is a structural driver of term 

premium, the latter may prove to be more cyclical

0

5

10

15

20

0.0

1.0

2.0

3.0

4.0

5.0

1970 1980 1990 2000 2010 2020

%%

3y rolling volatility

Core CPI (LHS) ISM Manufacturing (RHS)

300

350

400

450

500

-250

-200

-150

-100

-50

0

50

100

150

200

Oct-22 Dec-22 Feb-23 Apr-23 Jun-23 Aug-23 Oct-23

Basis points

Basis points

SFR2-6 spread, bp 5y5y nominal rate (RHS)

Rising term premium is evident in divergence between 5y5y nominal 

rate and Fed expectations over the next year

Macroeconomic data has been volatile, contributing to the rise in 

term premium

Source: Bloomberg
14

Source: Bloomberg

Less negative correlation between Treasuries and risk assets has 

contributed to rise in term premium

2

Drivers of higher term premium (continued)

• Treasury risk asset correlation

o Correlation of Treasuries and equities returns has 

become positive over the past year; a departure 

from patterns since the 2000s 

o This has reduced the diversification benefit of 

Treasuries in portfolio construction and 

contributed to a rise in term premium

• Lower foreign participation

o Despite stronger demand in 2023 YTD, foreign 

demand may face structural headwinds

o Global FX reserves growth has stalled and the 

globalization trends of past three decades face 

realignment

o These changes have led to lower official foreign 

demand for Treasuries relative to the increases in 

issuance; which may be secular 

o Foreign investors now hold ~20% of T-bills 

outstanding ex-Fed, compared with ~50% in 2015. 

Growth in foreign demand for coupon Treasuries 

has also not kept up with the pace of issuance, 

reducing the share held by foreigners

o It is unlikely that foreign investors maintain 35%-

50% of demand like in the previous decade. A 

greater proportion of issuance is likely to be 

domestically financed

Factor 2: Assessment of structural nature of higher term premium

-100%

-75%

-50%

-25%

0%

25%

50%

75%

100%

2000 2003 2006 2009 2012 2015 2018 2021

2y rolling correlation between 10y 

Tsy and S&P 500 total return

Source: Federal Reserve

Foreign investor share of holdings are now lower than in 2015

0%

20%

40%

60%

80%

03 05 07 09 11 13 15 17 19 21 23

Foreign holdings, as % of outstanding

Foreign holdings, % of T-bills ex-Fed

Foreign holdings, % of coupon Treasuries ex-Fed
-16

-14

-12

-10

-8

-6

-4

-2

0

2

2019 2020 2021 2022 2023 2024

Deviation from pre-pandemic trend 

output (%)

US Euro area China

15

Source: Vanguard, BEA, Eurostat and CEIC, as of 2Q 2023

Sources: Vanguard calculations using data from the U.S. Bureau of Labor Statistics, Eurostat, PBOC 

Progress on taming inflation in the U.S. and Euro area has been 

slow, but China has faced the opposite problem1

-4

-2

0

2

4

6

8

2006 2008 2010 2012 2014 2016 2018 2020 2022

Core inflation (% YoY)

U.S. Euro area China

2

Factor 3: Potential asynchronous easing of global monetary policy:

While global monetary hikes were synchronous, subsequent policy changes might not be

US economic resilience might make the Fed more patient in normalizing policy 

• While global central banks were largely synchronous 

in tightening policy, economic outlooks have 

meaningfully diverged

• On the growth front, US growth has been more 

resilient than that in Euro area and China, with real 

GDP in the US reaching to pre-pandemic trend 

• US has also made greater progress on taming 

inflation relative to the Euro area

• These factors may lead to asynchronous policy 

changes, with the Fed having the capacity to be more 

patient, which could alter Treasury demand profile

o In this scenario, investors might find non-US debt 

relatively more attractive from a total return 

perspective 

o Relatively higher short rates in the US than in 

foreign currency would make FX hedging more 

expensive for foreign investors

Projection

Projection

1) Chart shows the core consumer price index (CPI). Year-end 2023 figures are Vanguard forecasts
How should these views inform future issuance decisions?

3
 (160)

 (120)

 (80)

 (40)

 -

 40

 80

2y 3y 5y 7y 10y

ACM Model term premium (bps)

Jul-20 Oct-23

+65bp +80bp +110bp +135bp +170bp

17

Source: NY Fed, Bloomberg

3

Recommendations for near term debt issuance 

We recommend tilting issuance toward tenors less impacted by the 

rise in term premium and those with greater liquidity premium

There is room to increase TIPS ex-T-bills marketable debt outstanding

Source: Bloomberg

9.4%

7.5%

0%

4%

8%

12%

16%

00 02 04 06 08 10 12 14 16 18 20 22

TIPS, as % of non T-bill marketable debt TIPS, as % of marketable debt

Recommendations

• Given the analysis of the evolving demand base 

shifting toward more price sensitive investors and 

rising term premium, we recommend greater 

flexibility and variation in issuance profile, within the 

construct of regular and predictable issuance to 

increase responsiveness to shifting demand 

• Specifically: 

• Increase auction sizes greater than pro-rata for issues 

less impacted by the rise in term premium (e.g., 2Y, 

5Y), and issues that benefit from greater liquidity (e.g., 

10Y) 

• Positive inflation risk premium, which may persist, 

makes TIPS cheaper to issue ex-ante 

o There is room to increase TIPS universe, as a 

percentage of outstanding (currently less 

than 10%), with a focus on intermediate 

issuance

▪ As was noted in the Q2 2023 TBAC 

charge ‘TIPS Issuance, Demand, and 

Level of Supply’, demand for TIPS 

remains structurally strong and demand 

for shorter duration TIPS has increased 

considerably over the past decade

▪ While demand slowed cyclically in 2022, 

flows into the largest two TIPS ETFs show 

stabilization over the past six months, 

likely as the end of the hiking cycle 

comes into view
18

Source: Bloomberg

100

150

200

250

300

350

2005 2007 2009 2011 2013 2015 2017 2019 2021 2023

Basis points

5y5y inflation exp, SPF Survey 5y5y breakevens

3

Recommendations for further study

Positive inflation risk premium makes TIPS cheaper to issue ex-ante

Recommendations

• While the long-term guidance of T-bills outstanding at 

15-20% of total, and recent deviations to maintain 

regular and predictable approach to coupon issuance, 

are appropriate, we recommend the committee 

explore if more meaningful deviations are necessary 

o The analysis should evaluate patterns of inflows 

into MMFs, and other T-bills investor bases, under 

various economic scenarios, and their allocation 

decisions into T-bills -- This analysis could inform 

optimal decision making for the flexibility of the Tbills band

• Consider additional responsiveness of issuance 

strategy to key metrics such as interest rate expense, 

as % of GDP, and a reexamination of the optimal 

tradeoff between cost to tax-payer and rollover risk 

management 

o Specifically, we recommend evaluating the tradeoffs between reduced interest expense vs. higher 

debt funding cost volatility

• We recommend evaluating the suitability of new 

inflation related products, such as front-end TIPS, for 

investors who may view increased volatility of this 

product to be attractive from a risk / reward 

perspective 

Interest rate expense, as % of GDP, is likely to rise over the medium term

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1940 1950 1960 1970 1980 1990 2000 2010 2020 2030

Net interest expense, % of GDP

Source: CBO

Projection
19

Conclusions

• Composition of demand for US Treasuries has shifted toward more price sensitive investors over the past two years, contributing to a rise in 

term premium 

• Borrowing needs, which are expected to be structurally higher across economic scenarios and could go higher still if there is a recession, have 

magnified the effects of a changed demand base

• Demand base evolution is a function of economic scenarios. A recession would likely result in increased demand from most key investor bases. 

However, a soft-landing scenario might result in a continuation of current demand patterns. Subsequent asynchronous monetary policy actions 

could also shape demand landscape

• In light of these conclusions, we recommend:

o The Treasury consider tilting issuance toward tenors less impacted by the rise in term premium and those that benefit from greater 

liquidity premium, including TIPS (especially in intermediate maturities)

o The committee maintain the long-term guidance that T-bills make up 15-20% of outstanding but support meaningful deviation in the

medium term

o A further study into how nimbly, and within what range, should the committee recommend the Treasury change the medium term 

expected interest cost to roll-over risk ratio

o The committee conduct further analysis into new products and processes, such as those presented in the January 2019 TBAC charge 

“Potential Innovations in Treasury Products and Tools”, to further appeal to the needs of both new and existing investors