Treasury Presentation to TBAC
Office of Debt Management

Fiscal Year 2021 Q1 Report
Table of Contents

2

I. Executive Summary p. 4

II. Fiscal

A. Quarterly Tax Receipts p. 6

B. Monthly Receipt Levels p. 7

C. Largest Outlays p. 8

D. Treasury Net Nonmarketable Borrowing p. 9

E. Cumulative Budget Deficits p. 10

F. Deficit and Borrowing Estimates p. 11

G. Budget Surplus/Deficit p. 12

H. Privately-Held Net Marketable Borrowing Outlook p. 13

III. Financing

A. Sources of Financing p. 16

B. Interest Rate Assumptions p. 18

C. Projected Net Marketable Borrowing Assuming Future Issuance Remains Constant p. 19

IV. Portfolio Metrics

A. Historical Weighted Average Maturity of Marketable Debt Outstanding p. 21

B. Bills, TIPS & FRNs Outstanding as a Percent of Marketable Debt Outstanding p. 22

C. Maturity Profile p. 24

V. Demand

A. Summary Statistics p. 26

B. Bid-to-Cover Ratios p. 27

C. Investor Class Awards at Auction p. 32

D. Primary Dealer Awards at Auction p. 36

E. Direct Bidder Awards at Auction p. 37

F. Foreign Awards at Auction p. 38

G. Foreign Holdings: Official and Private p. 39
Section I:

Executive Summary

3
Receipts and Outlays through Q1 FY2021

• In Q1 FY2021, overall receipts totaled $803 billion, reflecting a decrease of $3 billion (-0.4%) compared to the same period last year. Corporate 

refunds were $7 billion (53%) higher, primarily because of CARES Act provisions that expand allowances for net operation losses. Individual 

refunds were $4 billion (18%) higher. Withheld and FICA taxes declined $20 billion (-3%), and gross excise taxes declined $5 billion (-23%) 

primarily due to the economic impact of the COVID-19 pandemic and deferral of employment taxes authorized in the CARES Act and other 

actions. Partially offsetting the decreases, non-withheld and SECA taxes increased $13 billion (24%). Federal Reserve earnings were $8 billion 

(54%) higher reflecting greater holdings and lower interest rates paid on reserves. Corporate taxes were $10 billion (13%) higher through the 

first three months of the fiscal year, including the first major due date in December. Q1 FY2021 receipts were 15.0% of GDP, compared to 

14.8% of GDP for the same period last year.

• In Q1 FY2021, calendar adjusted overall outlays were $1,332 billion, reflecting an increase of $190 billion (17%) over the comparable period 

last year. Department of Labor outlays were $74 billion (1,450%) higher due to increased unemployment costs attributable to the COVID-19 

pandemic. Health and Human Services spending was $47 billion (15%) higher mainly due to the COVID-19 pandemic as well as overall

increases to Medicare and Medicaid. Department of Agriculture outlays were $19 billion (37%) higher due to increases in food stamp 

program payments and financial assistance payments to agricultural producers that are authorized in COVID-19 pandemic related 

legislation. Somewhat offsetting these, Department of Treasury outlays were $18 billion lower mainly due to lower interest expense. Q1 

FY2021 outlays were 25.7% of GDP, compared to 21.4% of GDP for the same period last year. This is an increase compared to the 20-year 

average from 2000 to 2019 of 20.8%. 

Projected Net Marketable Borrowing (FY2021)

• Treasury’s Office of Fiscal Projections (OFP) currently forecasts a net privately-held marketable borrowing need of $274 billion for Q2 

FY2021, with an end-of-March cash balance of $800 billion. For Q3 FY2021, OFP forecasts a net privately-held marketable borrowing need 

of $95 billion assuming end-of-June cash balance of $500 billion. These borrowing estimates are based upon current law and do not include 

any assumptions for the impact of additional legislation that may be passed. Enactment of additional recovery and stimulus related 

legislation could result in actual borrowing that is greater than these current law estimates. Privately-held marketable borrowing excludes 

rollovers (auction “add-ons”) of Treasury securities held in the Federal Reserve’s 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 would increase the amount of cash raised for a given privately-held auction size by increasing the SOMA “add-on” amount.

Demand for Treasury Securities

• Bid-to-cover ratios for all securities were within historical ranges over the last quarter. 

• Foreign demand remained robust.

Highlights of Treasury’s February 2021 Quarterly Refunding Presentation

to the Treasury Borrowing Advisory Committee (TBAC)

4
Section II:

Fiscal

5
6

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

Source: United States Department of the Treasury

(100%)

(50%)

0 %

50%

100%

150%

200%

250%

300% Dec-10 Mar-11 Jun-11

Sep-11 Dec-11 Mar-12 Jun-12Sep-12 Dec-12 Mar-13 Jun-13Sep-13 Dec-13 Mar-14 Jun-14Sep-14 Dec-14 Mar-15 Jun-15Sep-15 Dec-15 Mar-16 Jun-16Sep-16 Dec-16 Mar-17 Jun-17Sep-17 Dec-17 Mar-18 Jun-18Sep-18 Dec-18 Mar-19 Jun-19Sep-19 Dec-19 Mar-20 Jun-20Sep-20 Dec-20 Year-over-Year % Change

Quarterly Tax Receipts

Corporate Taxes Non-Withheld Taxes (incl SECA) Withheld Taxes (incl FICA)
7

Quarterly 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. 

Source: United States Department of the Treasury 

0

2 0

4 0

6 0

8 0

100

120

140

160

180 Dec-10 Mar-11 Jun-11

Sep-11 Dec-11 Mar-12 Jun-12Sep-12 Dec-12 Mar-13 Jun-13Sep-13 Dec-13 Mar-14 Jun-14Sep-14 Dec-14 Mar-15 Jun-15Sep-15 Dec-15 Mar-16 Jun-16Sep-16 Dec-16 Mar-17 Jun-17Sep-17 Dec-17 Mar-18 Jun-18Sep-18 Dec-18 Mar-19 Jun-19Sep-19 Dec-19 Mar-20 Jun-20Sep-20 Dec-20 $ bn

Monthly Receipt Levels

(12-Month Moving Average)

Individual Income Taxes Corporate Income Taxes Social Insurance Taxes Other
8

Source: United States Department of the Treasury 0

5 0

100

150

200

250

300

350

400 HHS SSA Defense Treasury Labor Agriculture V A Homeland Security OPM Transportation Education Other Defense Civil $ bn

Largest Outlays

Oct - Dec FY 2020 Oct - Dec FY 2021
9

Source: United States Department of the Treasury

(40)

(30)

(20)

(10)0

1 0

2 0

3 0 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 Q4-20 Q1-21 $ bn

Fiscal Quarter

Treasury Net Nonmarketable Borrowing

Foreign Series State and Local Govt. Series (SLGS) Savings Bonds
10

Source: United States Department of the Treasury

0

500

1,000

1,500

2,000

2,500

3,000

3,500 October November December January

February March April

May

June

July

August

September $ bn

Cumulative Budget Deficits by Fiscal Year

FY2019 FY2020 FY2021
11

Primary Dealers1 CBO2

FY2021 Deficit Estimate 3,200 1,810

FY2022 Deficit Estimate 1,743 1,336

FY2023 Deficit Estimate 1,327 1,124

FY2021 Deficit Estimate Range 2,400-4,600

FY2022 Deficit Estimate Range 1,300-3,100

FY2023 Deficit Estimate Range 700-2,000

FY2021 Privately-Held Net Marketable Borrowing Estimate 2,600 1,661

FY2022 Privately-Held Net Marketable Borrowing Estimate 1,700 1,389

FY2023 Privately-Held Net Marketable Borrowing Estimate 1,325 1,200

FY2021 Privately-Held Net Marketable Borrowing Range 1,100-3,800

FY2022 Privately-Held Net Marketable Borrowing Range 800-2,600

FY2023 Privately-Held Net Marketable Borrowing Range 600-1,900

Estimates as of: Jan-21 Sep-20

FY 2021-2023 Deficits and Privately-Held Net Marketable Borrowing Estimates*, in $ billions

*Privately-held marketable borrowing excludes rollovers (auction “add-ons”) of Treasury securities held in the Federal Reserve’s 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, would increase the amount of cash raised for a given privately-held auction size by increasing the SOMA “addon” amount.

2CBO estimates are from Table 1 of "An Update to the Budget Outlook: 2020 to 2030,” September, 2020.

1Estimates represent the medians from the primary dealer survey in January 2021.

According to the “An Overview of the Economic Outlook: 2021 To 2031" published on Feb 2021, CBO estimates that the pandemic-related 

provisions in the Consolidated Appropriations Act, 2021 signed in December 2020, will add $774 billion to the deficit in fiscal year 2021 and $98 

billion in 2022. https://www.cbo.gov/system/files/2021-02/56965-Economic-Outlook.pdf.
(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

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Deficit to GDP $bn

Budget Surplus/Deficit*

OMB's (Feb 20) Surplus/Deficit (LHS) CBO's (Sept 20) Surplus/Deficit (LHS)

PD Survey (Jan 21) (LHS) OMB's (Feb 20) Surplus/Deficit as a % of GDP (RHS)

CBO's (Sept 20) Surplus/Deficit as a % of GDP (RHS)

OMB’s Projections are from OMB’s Table S-10 of “A Budget for America’s Future, Fiscal Year 2021,” February 2020.

CBO’s Projections are from CBO’s Table 1 of “An Update to the Budget Outlook: 2020 to 2030,” September 2020.

According to the “An Overview of the Economic Outlook: 2021 To 2031” published on Feb 2021, CBO estimates that the 

pandemic-related provisions in the Consolidated Appropriations Act, 2021 signed in December 2020, will add $774 billion to the 

deficit in fiscal year 2021 and $98 billion in 2022. https://www.cbo.gov/system/files/2021-02/56965-Economic-Outlook.pdf. 

*OMB projections reflect pre-CARES Act forecasts and will be updated when new projections become available. 

Projections

12
13

* Privately-held marketable borrowing excludes rollovers (auction “add-ons”) of Treasury securities held in the Federal Reserve’s 

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, 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. Enactment of additional recovery and

stimulus related legislation could result in actual borrowing that is greater than these current law estimates.

Privately-Held Net Marketable Borrowing Outlook*

$ 0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Q1 Q2 Q3 Q4

$ bn

FY18 FY19 FY20 FY21 FY 21 (projection-OFP)
Section III:

Financing

14
15

Assumptions for Financing Section (pages 16 to 19)

• Portfolio and SOMA holdings as of 12/31/2020.

• Estimates assume private announced issuance sizes and patterns remain constant for nominal coupons, 

TIPS, and FRNs given changes made before the February 2021 refunding, while using total bills 

outstanding of ~$4.96 trillion. 

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

as of 12/31/2020.

• No attempt was made to account for future financing needs. 
16

*Privately-held marketable borrowing excludes rollovers (auction “add-ons”) of Treasury securities held in the Federal Reserve’s 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, would increase the amount of cash raised for a given privately-held auction size by increasing the SOMA 

“add-on” amount.

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

Net Bill Issuance (65) Security Gross Maturing Net Gross Maturing Net

Net Coupon Issuance 662 4-Week 390 390 (0) 390 390 (0)

Subtotal: Net Marketable Borrowing 597 8-Week 455 455 0 455 455 0

13-Week 756 756 (0) 756 756 (0)

Ending Cash Balance 1729 26-Week 714 711 3 714 711 3

Beginning Cash Balance 1782 52-Week 136 6 4 7 2 136 6 4 7 2

Subtotal: Change in Cash Balance (53) CMBs

6-Week 390 390 0 390 390 0

Net Implied Funding for FY 2021 Q1** 650 15-Week 325 340 (15) 325 340 (15)

17-Week 420 445 (25) 420 445 (25)

22-Week 390 460 (70) 390 460 (70)

39-Week 0 0 0 0 0 0

Other 3 0 6 0 (30) 3 0 6 0 (30)

Bill Subtotal 4,006 4,071 (65) 4,006 4,071 (65)

Security Gross Maturing Net Gross Maturing Net

2-Year FRN 7 4 5 5 1 9 7 4 5 5 1 9

2-Year 168 8 6 8 2 168 8 6 8 2

3-Year 162 5 8 104 162 5 8 104

5-Year 171 8 3 8 8 171 8 3 8 8

7-Year 168 6 1 107 168 6 1 107

10-Year 114 4 3 7 1 114 4 3 7 1

20-Year 7 3 0 7 3 7 3 0 7 3

30-Year 7 4 0 7 4 7 4 0 7 4

5-Year TIPS 3 2 0 3 2 3 2 0 3 2

10-Year TIPS 1 2 0 1 2 1 2 0 1 2

30-Year TIPS 0 0 0 0 0 0

Coupon Subtotal 1,048 386 662 1,048 386 662

October - December 2020 Fiscal Year-to-Date

Coupon Issuance Coupon Issuance

Sources of Privately-Held Financing in FY21 Q1*

October - December 2020 October - December 2020 Fiscal Year-to-Date

Bill Issuance Bill Issuance
17

* Privately-held marketable borrowing excludes rollovers (auction “add-ons”) of Treasury securities held in the Federal Reserve’s 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, would increase the amount of cash 

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

** Keeping announced issuance sizes and patterns constant for nominal coupons, TIPS, and FRNs based on changes made before the February 2021 refunding. 

*** Assumes an end-of-March 2021 cash balance of $800 billion versus a beginning-of-January 2021 cash balance of $1,729 billion.

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

^ Maturing amounts could change based on future Federal Reserve purchases.

Assuming Constant Coupon Issuance Sizes**

Treasury Announced Net Marketable Borrowing*** 274

Net Coupon Issuance 695

Implied Change in Bills (421)

Security Gross Maturing^ Net Gross Maturing Net

2-Year FRN 8 0 5 6 2 4 154 111 4 3

2-Year 180 4 9 131 348 135 213

3-Year 174 5 8 116 336 115 221

5-Year 183 8 3 100 354 166 188

7-Year 186 8 4 102 354 145 209

10-Year 117 4 1 7 6 231 8 4 147

20-Year 7 5 0 7 5 148 0 148

30-Year 7 5 3 7 2 149 3 146

5-Year TIPS 0 0 0 3 2 0 3 2

10-Year TIPS 2 8 3 8 (10) 4 0 3 8 2

30-Year TIPS 8 0 8 8 0 8

Coupon Subtotal 1,106 411 695 2,154 797 1,357

Coupon Issuance Coupon Issuance

Sources of Privately-Held Financing in FY21 Q2*

January - March 2021

January - March 2021 Fiscal Year-to-Date
18

*CBO’s February 2021 economic assumption of the annual average 10-Year Treasury note rates reflect projections for 2021, 2022, 2023, and 

averages for the periods 2024-25 and 2026-30. The forward rates are the implied 10-Year Treasury note rates on December 31, 2020. 

0.5

1

1.5

2

2.5

3

3.5

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 1 0-Year Treasury Note Rate, %

Interest Rate Assumptions: 10-Year Treasury Note*

Implied Forward Rates as of 12/31/2020 CBO's "An Overview of the Economic Outlook: 2021 to 2031" (Feb 2021)

1 0-Year Treasury Rate of 

0.916% as of 12/31/2020

CBO estimates 3.0% 

average over 2026-30

CBO estimates 2.0% 

average over 2024-25
0

500

1,000

1,500

2,000

2,500

3,000

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 $bn

Fiscal Year

Projected Privately-Held Net Marketable Borrowing SOMA add-ons resulting from Future Fed Purchases (PD Expectation)

CBO's "An Update to the Budget Outlook: 2020 to 2030" September 2020 OMB's FY2021 Budget, February 2020

PD Survey Privately-Held Net Marketable Borrowing Estimates, January 2021

PD 75th percentile

PD 25th

percentile

PD 50th percentile

PD Survey Privately-Held Marketable Borrowing Estimates at 25th, 50th and 75th Percentile 

19

Projected Privately-Held Net Marketable Borrowing 

Assuming Private Coupon Issuance & Total Bills Outstanding Remain Constant as of 12/31/2020*

Treasury’s latest primary dealer survey median estimates can be found on page 11. OMB's projections of the change in debt held by the public are from Table S10 of “A Budget for America’s Future, Fiscal Year 2021,” February 2020. CBO’s current law budget projections of the change in debt held by the public for 

FY2021 to FY2030 are derived from Table 1 of CBO's “An Update to The Budget Outlook: 2020 to 2030,“ September 2020. According to the “An Overview of the 

Economic Outlook: 2021 To 2031” published on Feb 2021, CBO estimates that the pandemic-related provisions in the Consolidated Appropriations Act, 2021 

signed in December 2020, will add $774 billion to the deficit in fiscal year 2021 and $98 billion in 2022. https://www.cbo.gov/system/files/2021-02/56965-

Economic-Outlook.pdf. Future Fed purchases are derived from the Fed’s December 2020 Primary Dealer Survey median results with maturity bucket weights 

based on current operations and pro-rata across securities within each maturity bucket. 

https://www.newyorkfed.org/medialibrary/media/markets/survey/2020/dec-2020-spd-results.pdf. 

* Privately-held marketable borrowing excludes rollovers (auction “add-ons”) of Treasury securities held in the Federal Reserve’s System Open Market Account 

(SOMA) but includes financing required due to SOMA redemptions. No adjustments are made for open-market outright purchases. 

OMB projections before April 2020 reflect pre-CARES Act forecasts and will be updated when new projections become available.
Section IV:

Portfolio Metrics

20
21

4 0

4 5

5 0

5 5

6 0

6 5

7 0

7 5

8 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Weighted Average Maturity (Months)

Calendar Year

Historical Weighted Average Maturity of Marketable Debt 

Outstanding

Historical Historical Average from 1980 to end of Q1 FY2021

12/31/2020 

64.6 months

60.2 months (Historical Average 

from 1980 to Present)
22

0

5

10

15

20

25

30

35

40 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Percent

Calendar Year

Bills, TIPS & FRNs Outstanding as a Percent of 

Marketable Debt Outstanding

Bills TIPS FRNs

Bills Historical Average = 22.7%

Max 10.7%

Max 2.6%

12/31/20 

23.7%

12/31/20 

7.5%

12/31/20 

2.4%

Max 

35.6%
23

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50% 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000 $ bn

Private Bills Holdings as a Percentage of Total Private Holdings

Private Bills Holdings Private Bills Holdings as a Percentage of Total Private Holdings (RHS)

12/31/20 28%

12/31/20 $4,633 bn
24

2 0

3 0

4 0

5 0

6 0

7 0

8 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Percent

Calendar Year

Treasury Maturity Profile History

Percent Maturing <=1 Year Percent Maturing <= 3 Years

12/31/20 

57%

12/31/20 

35%
Section V:

Demand

25
26

*Weighted averages of Competitive Awards. 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.

Security 

Type Term Stop Out Rate (%)*

Bid-toCover 

Ratio*

Competitive 

Awards ($bn)

% Primary 

Dealer*

% 

Direct*

% 

Indirect*

NonCompetitive 

Awards ($bn)

SOMA 

"AddOns" ($bn)

10-Year 

Equivalent 

($bn)**

Bill 4-Week 0.080 3.4 399.8 58.5 8.3 33.3 20.16 38.6 3.7

Bill 8-Week 0.084 3.3 479.4 50.2 5.1 44.7 10.64 45.1 8.7

Bill 13-Week 0.092 2.9 685.6 49.7 6.9 43.4 16.43 81.5 20.7

Bill 26-Week 0.101 3.2 650.9 41.0 4.8 54.1 12.07 76.9 39.0

Bill 52-Week 0.124 3.4 135.1 55.4 5.0 39.6 0.95 21.3 16.5

CMB 6-Week 0.084 3.4 389.7 53.4 8.7 37.9 0.34 0.0 4.8

CMB 15-Week 0.093 3.8 325.0 51.3 5.8 42.9 0.04 0.0 9.9

CMB 17-Week 0.096 3.5 389.8 57.6 5.0 37.4 0.23 0.0 13.5

CMB 22-Week 0.099 3.5 390.0 54.1 5.2 40.8 0.02 0.0 17.4

Coupon 2-Year 0.151 2.5 167.6 34.5 16.3 49.2 0.39 22.3 40.1

Coupon 3-Year 0.218 2.4 161.8 37.8 14.3 47.9 0.21 18.6 57.0

Coupon 5-Year 0.374 2.4 170.9 26.1 15.5 58.4 0.06 22.7 101.2

Coupon 7-Year 0.639 2.3 168.0 22.3 15.5 62.2 0.01 22.4 137.6

Coupon 10-Year 0.897 2.4 114.0 26.2 14.0 59.8 0.04 13.8 128.4

Coupon 20-Year 1.422 2.4 73.0 23.7 16.2 60.1 0.00 9.7 151.6

Coupon 30-Year 1.643 2.4 74.0 20.6 16.1 63.2 0.02 9.1 208.3

TIPS 5-Year -1.440 2.8 31.9 21.6 15.0 63.4 0.07 2.3 17.7

TIPS 10-Year -0.867 2.7 12.0 14.1 16.5 69.3 0.01 1.7 13.8

FRN 2-Year 0.056 3.0 73.9 46.0 2.5 51.5 0.07 2.8 0.0

Total Bills 0.093 3.3 3,845.2 51.2 6.1 42.7 60.88 263.4 134.2

Total Coupons 0.602 2.4 929.3 28.4 15.3 56.3 0.74 118.7 824.0

Total TIPS -1.283 2.7 43.9 19.6 15.4 65.0 0.08 3.9 31.5

Total FRN 0.056 3.0 73.9 46.0 2.5 51.5 0.07 2.8 0.0

Summary Statistics for Fiscal Year 2021 Q1 Auctions
1

1.5

2

2.5

3

3.5

4

4.5

5

5.5

6 Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12

Aug-12 Nov-12 Feb-13 May-13Aug-13 Nov-13 Jan-14 May-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 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)

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

27
28

1

1.5

2

2.5

3

3.5

4

4.5

5

5.5

6 Jun-14

Sep-14 Dec-14 Mar-15 Jun-15Sep-15 Dec-15 Mar-16 Jun-16Sep-16 Dec-16 Mar-17 Jun-17Sep-17 Dec-17 Mar-18 Jun-18Sep-18 Dec-18 Mar-19 Jun-19Sep-19 Dec-19 Mar-20 Jun-20Sep-20 Dec-20 Bid-to-Cover Ratio

Bid-to-Cover Ratios for FRNs

(6-Month Moving Average)
29

1

1.5

2

2.5

3

3.5

4

4.5

5

5.5

6 Dec-15 Feb-16 Apr-16

Jun-16

Aug-16 Oct-16 Dec-16 Feb-17 Apr-17

Jun-17

Aug-17 Oct-17 Dec-17 Feb-18 Apr-18

Jun-18

Aug-18 Oct-18 Dec-18 Feb-19 Apr-19

Jun-19

Aug-19 Oct-19 Dec-19 Feb-20 Apr-20

Jun-20

Aug-20 Oct-20 Dec-20 Bid-to-Cover Ratio

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

(6-Month Moving Average)

2-Year 3-Year 5-Year
30

1

1.5

2

2.5

3

3.5

4

4.5

5

5.5

6 Dec-15 Feb-16 Apr-16

Jun-16

Aug-16 Oct-16 Dec-16 Feb-17 Apr-17

Jun-17

Aug-17 Oct-17 Dec-17 Feb-18 Apr-18

Jun-18

Aug-18 Oct-18 Dec-18 Feb-19 Apr-19

Jun-19

Aug-19 Oct-19 Dec-19 Feb-20 Apr-20

Jun-20

Aug-20 Oct-20 Dec-20 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
31

1

1.5

2

2.5

3

3.5

4

4.5

5

5.5

6 Dec-06 May-07 Oct-07 Apr-08

Sep-08 Feb-09 Jul-09

Jan-10

Jun-10 Nov-10 Apr-11 Oct-11 Mar-12 Aug-12

Jan-13

Jul-13 Dec-13 May-14 Oct-14 Apr-15

Sep-15 Feb-16 Jul-16

Jan-17

Jun-17 Nov-17 Apr-18 Oct-18 Mar-19 Aug-19

Jan-20

Jul-20 Dec-20 Bid-to-Cover Ratio

Bid-to-Cover Ratios for TIPS

5-Year 10-Year (6-month moving average) Long-end (20- & 30-year)
32

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% Dec-16 Feb-17 Apr-17

Jun-17

Aug-17 Oct-17 Dec-17 Feb-18 Apr-18

Jun-18

Aug-18 Oct-18 Dec-18 Feb-19 Apr-19

Jun-19

Aug-19 Oct-19 Dec-19 Feb-20 Apr-20

Jun-20

Aug-20 Oct-20 Dec-20 1 3-week moving average

Percent Awarded in Bill Auctions by Investor Class 

(13-Week Moving Average)

Other Dealers and Brokers Investment Funds Foreign and International Other
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 %

10%

20%

30%

40%

50%

60% Dec-16 Feb-17 Apr-17

Jun-17

Aug-17 Oct-17 Dec-17 Feb-18 Apr-18

Jun-18

Aug-18 Oct-18 Dec-18 Feb-19 Apr-19

Jun-19

Aug-19 Oct-19 Dec-19 Feb-20 Apr-20

Jun-20

Aug-20 Oct-20 Dec-20

6-month moving average

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

Auctions by Investor Class (6-Month Moving Average)

Other Dealers and Brokers Investment Funds Foreign and International 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% Dec-16 Feb-17 Apr-17

Jun-17

Aug-17 Oct-17 Dec-17 Feb-18 Apr-18

Jun-18

Aug-18 Oct-18 Dec-18 Feb-19 Apr-19

Jun-19

Aug-19 Oct-19 Dec-19 Feb-20 Apr-20

Jun-20

Aug-20 Oct-20 Dec-20

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 and 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%

90% Dec-16 Feb-17 Apr-17

Jun-17

Aug-17 Oct-17 Dec-17 Feb-18 Apr-18

Jun-18

Aug-18 Oct-18 Dec-18 Feb-19 Apr-19

Jun-19

Aug-19 Oct-19 Dec-19 Feb-20 Apr-20

Jun-20

Aug-20 Oct-20 Dec-20

6-month moving average

Percent Awarded in TIPS Auctions by Investor Class

(6-Month Moving Average)

Other Dealers and Brokers Investment Funds Foreign and International Other
36

Competitive Amount Awarded excludes SOMA add-ons. 

10%

20%

30%

40%

50%

60%

70%

Jun-16

Aug-16 Oct-16 Dec-16 Feb-17 Apr-17

Jun-17

Aug-17 Oct-17 Dec-17 Feb-18 Apr-18

Jun-18

Aug-18 Oct-18 Dec-18 Feb-19 Apr-19

Jun-19

Aug-19 Oct-19 Dec-19 Feb-20 Apr-20

Jun-20

Aug-20 Oct-20 Dec-20 % of Total Competitive Amount Awarded

Primary Dealer Awards at Auction

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

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

TIPS (6-month moving average)
37

Competitive Amount Awarded excludes SOMA add-ons. 

0 %

5 %

10%

15%

20%

25%

Jun-16

Aug-16 Oct-16 Dec-16 Feb-17 Apr-17

Jun-17

Aug-17 Oct-17 Dec-17 Feb-18 Apr-18

Jun-18

Aug-18 Oct-18 Dec-18 Feb-19 Apr-19

Jun-19

Aug-19 Oct-19 Dec-19 Feb-20 Apr-20

Jun-20

Aug-20 Oct-20 Dec-20 % of Total Competitive Amount Awarded

Direct Bidder Awards at Auction

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

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

TIPS (6-month moving-average)
38

Foreign includes both private sector and official institutions. 0

2 0

4 0

6 0

8 0

100

120

140

160 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19

May-19

Jun-19

Jul-19

Aug-19

Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20

May-20

Jun-20

Jul-20

Aug-20

Sep-20 Oct-20 Nov-20 Dec-20 $ bn

Total Foreign Awards of Treasuries at Auction, $ billions

Bills 2/3/5 7/10/20/30 TIPS FRN
0 %

10%

20%

30%

40%

50%

60%

0

1,000

2,000

3,000

4,000

5,000

6,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 $ bn

Bills

Outstanding Foreign Holdings Foreign % (RHS)

11/30/20 

4,944

11/30/20 

21%

11/30/20 1,024

39

Source: Treasury International Capital (TIC) System.

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 %

20%

40%

60%

80%

100%

0

4,000

8,000

12,000

16,000

20,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 $ bn

Nominal Coupons, TIPS, and FRNs

Outstanding Foreign Holdings Foreign % (RHS)

11/30/20 15,741

11/30/20 38%

11/30/20 

6,030
Appendix

40
41

Projected Privately-Held Net Marketable Borrowing 

Assuming Private Coupon Issuance & Total Bills Outstanding 

Remain Constant as of 12/31/2020*

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.

*Privately-held marketable borrowing excludes rollovers (auction “add-ons”) of Treasury securities held in the Federal 

Reserve’s System Open Market Account (SOMA) but includes financing required due to SOMA redemptions. 

Fiscal 

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

Historical/Projected 

Net Borrowing 

Capacity

2016 289 (107) 515 58 41 795 

2017 155 (66) 378 51 (0) 519 

2018 438 197 493 45 23 1,196 

2019 137 498 534 51 59 1,280 

2020 2,652 538 724 46 55 4,014 

2021 (65) 1,250 1,324 51 92 2,652 

2022 0 1,003 1,370 44 80 2,496 

2023 0 776 1,190 29 6 2,002 

2024 0 482 1,297 46 0 1,824 

2025 0 227 1,290 (17) 0 1,500 

2026 0 12 1,276 (1) 0 1,288 

2027 0 0 1,214 1 0 1,215 

2028 0 0 805 (16) 0 789 

2029 0 0 825 (9) 0 816 

2030 0 0 795 1 0 797 
42

*Weighted averages of competitive awards.

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

Issue Settle Date Stop Out 

Rate (%)*

Bid-toCover 

Ratio*

Competitive 

Awards ($bn)

% Primary 

Dealer* % Direct* % Indirect*

NonCompetitive 

Awards ($bn)

SOMA "Add 

Ons" ($bn)

10-Year 

Equivalent 

($bn)**

4-Week 10/6/2020 0.085 3.33 28.6 51.1 10.3 38.6 1.4 2.9 0.3

4-Week 10/13/2020 0.090 3.34 28.7 70.5 6.3 23.2 1.3 2.4 0.3

4-Week 10/20/2020 0.090 3.29 28.6 61.9 6.2 32.0 1.4 2.9 0.3

4-Week 10/27/2020 0.085 3.56 29.0 58.9 16.7 24.3 1.0 2.8 0.3

4-Week 11/3/2020 0.080 3.30 28.1 68.2 6.5 25.2 1.9 2.9 0.3

4-Week 11/10/2020 0.080 3.32 28.5 54.3 4.9 40.8 1.5 2.4 0.3

4-Week 11/17/2020 0.085 3.40 28.9 66.6 8.1 25.2 1.1 2.9 0.3

4-Week 11/24/2020 0.070 3.53 28.5 56.7 6.9 36.5 1.5 2.8 0.3

4-Week 12/1/2020 0.080 3.38 28.6 50.1 6.8 43.2 1.4 2.9 0.3

4-Week 12/8/2020 0.075 3.37 28.5 60.9 7.5 31.6 1.5 2.4 0.3

4-Week 12/15/2020 0.065 3.64 28.6 63.4 7.6 29.0 1.4 2.9 0.3

4-Week 12/22/2020 0.075 3.54 28.5 41.8 11.8 46.4 1.5 2.8 0.3

4-Week 12/29/2020 0.080 3.37 28.6 49.0 9.2 41.8 1.4 2.9 0.3

4-Week 1/5/2021 0.080 3.06 28.1 65.2 6.7 28.1 1.9 2.4 0.3

8-Week 10/6/2020 0.085 3.61 34.0 37.3 1.9 60.8 1.0 3.4 0.6

8-Week 10/13/2020 0.090 3.45 33.9 53.7 1.9 44.5 1.1 2.8 0.6

8-Week 10/20/2020 0.095 3.21 34.3 54.8 3.3 42.0 0.7 3.4 0.6

8-Week 10/27/2020 0.090 3.51 34.3 49.6 10.8 39.6 0.7 3.3 0.6

8-Week 11/3/2020 0.085 3.45 33.8 50.6 4.2 45.1 1.2 3.4 0.6

8-Week 11/10/2020 0.085 3.11 34.5 69.7 6.9 23.4 0.5 2.8 0.6

8-Week 11/17/2020 0.090 3.25 34.5 50.2 7.5 42.3 0.5 3.4 0.6

8-Week 11/24/2020 0.070 3.23 34.6 57.2 7.8 35.0 0.4 3.3 0.6

8-Week 12/1/2020 0.080 3.47 33.8 43.5 1.6 54.8 1.2 3.4 0.6

8-Week 12/8/2020 0.075 3.35 34.4 38.0 2.6 59.4 0.6 2.8 0.6

8-Week 12/15/2020 0.075 3.38 34.6 52.2 6.2 41.6 0.4 3.4 0.6

8-Week 12/22/2020 0.080 3.38 34.5 39.5 7.4 53.1 0.5 3.3 0.6

8-Week 12/29/2020 0.090 3.27 34.2 46.7 4.1 49.2 0.8 3.4 0.6

8-Week 1/5/2021 0.085 2.84 33.8 59.6 4.8 35.6 1.2 2.8 0.6

Bills
43

*Weighted averages of competitive awards.

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

Issue Settle Date Stop Out Rate 

(%)*

Bid-toCover 

Ratio*

Competitive 

Awards ($bn)

% Primary 

Dealer* % Direct* % Indirect*

NonCompetitive 

Awards ($bn)

SOMA 

"Add Ons" 

($bn)

10-Year 

Equivalent 

($bn)**

13-Week 10/8/2020 0.095 2.81 52.5 44.2 5.5 50.3 1.5 8.2 1.6

13-Week 10/15/2020 0.105 2.72 52.7 55.4 6.2 38.4 1.3 5.9 1.6

13-Week 10/22/2020 0.100 3.00 52.8 53.6 5.6 40.8 1.2 6.9 1.6

13-Week 10/29/2020 0.100 2.90 52.3 51.6 8.5 39.8 1.7 4.9 1.6

13-Week 11/5/2020 0.095 2.79 53.0 51.5 6.0 42.5 1.0 8.5 1.7

13-Week 11/12/2020 0.100 2.65 53.0 63.1 5.4 31.6 1.0 5.9 1.6

13-Week 11/19/2020 0.090 3.14 52.9 44.4 4.2 51.3 1.1 7.3 1.6

13-Week 11/27/2020 0.085 2.67 52.4 58.1 10.7 31.2 1.6 4.6 1.5

13-Week 12/3/2020 0.085 2.93 53.0 47.6 6.1 46.3 1.0 7.9 1.6

13-Week 12/10/2020 0.080 3.11 52.8 35.0 12.9 52.1 1.2 4.6 1.5

13-Week 12/17/2020 0.075 2.90 52.9 48.7 7.5 43.8 1.1 5.5 1.6

13-Week 12/24/2020 0.090 2.82 52.8 50.5 6.4 43.1 1.2 2.1 1.5

13-Week 12/31/2020 0.095 2.81 52.5 42.7 4.9 52.3 1.5 9.1 1.7

26-Week 10/8/2020 0.110 2.91 49.8 47.1 2.9 49.9 1.2 7.7 3.1

26-Week 10/15/2020 0.115 3.02 50.2 38.5 2.2 59.3 0.8 5.6 3.0

26-Week 10/22/2020 0.115 3.04 50.1 38.6 6.5 54.9 0.9 6.5 3.0

26-Week 10/29/2020 0.110 3.49 49.5 35.8 5.8 58.4 1.5 4.6 2.9

26-Week 11/5/2020 0.110 2.98 50.4 47.2 4.9 47.9 0.6 8.1 3.1

26-Week 11/12/2020 0.110 2.98 50.3 43.4 4.0 52.6 0.7 5.5 3.0

26-Week 11/19/2020 0.100 3.18 50.2 51.5 3.5 44.9 0.8 6.9 3.0

26-Week 11/27/2020 0.090 3.57 49.6 39.1 10.4 50.5 1.5 4.3 2.9

26-Week 12/3/2020 0.090 3.20 50.4 41.4 2.3 56.3 0.6 7.5 3.1

26-Week 12/10/2020 0.090 3.32 50.3 30.4 8.3 61.3 0.7 4.4 2.9

26-Week 12/17/2020 0.085 3.16 50.2 48.5 5.3 46.2 0.8 5.2 3.0

26-Week 12/24/2020 0.090 3.15 50.4 36.1 2.8 61.2 0.6 2.0 2.8

26-Week 12/31/2020 0.100 3.10 49.6 35.8 4.0 60.2 1.4 8.6 3.2

52-Week 10/8/2020 0.140 3.15 33.8 56.2 2.7 41.1 0.2 5.2 4.1

52-Week 11/5/2020 0.135 3.54 33.8 58.5 3.0 38.5 0.2 5.4 4.2

52-Week 12/3/2020 0.110 3.73 33.7 48.3 2.7 49.1 0.3 5.0 4.1

52-Week 12/31/2020 0.110 3.21 33.8 58.4 11.8 29.9 0.2 5.7 4.2

Bills (cont.)
44

*Weighted averages of competitive awards.

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

Issue Settle Date Stop Out Rate 

(%)*

Bid-toCover 

Ratio*

Competitive 

Awards ($bn)

% Primary 

Dealer* % Direct* % Indirect*

NonCompetitive 

Awards ($bn)

SOMA 

"Add Ons" 

($bn)

10-Year 

Equivalent 

($bn)**

6-Week 10/8/2020 0.090 3.30 30.0 41.3 14.8 43.8 0.0 0.0 0.4

6-Week 10/15/2020 0.095 3.43 30.0 55.4 12.9 31.7 0.0 0.0 0.4

6-Week 10/22/2020 0.090 3.67 30.0 40.5 5.2 54.3 0.0 0.0 0.4

6-Week 10/29/2020 0.080 3.44 30.0 50.4 9.4 40.2 0.0 0.0 0.4

6-Week 11/5/2020 0.085 3.21 30.0 58.0 8.9 33.0 0.0 0.0 0.4

6-Week 11/12/2020 0.095 3.31 30.0 50.9 8.9 40.2 0.0 0.0 0.4

6-Week 11/19/2020 0.095 3.76 30.0 53.6 7.6 38.9 0.0 0.0 0.4

6-Week 11/27/2020 0.075 3.15 30.0 70.2 8.5 21.3 0.0 0.0 0.4

6-Week 12/3/2020 0.080 3.34 30.0 66.9 7.6 25.5 0.0 0.0 0.4

6-Week 12/10/2020 0.070 3.81 30.0 48.9 6.6 44.5 0.0 0.0 0.4

6-Week 12/17/2020 0.075 3.21 30.0 56.2 11.5 32.4 0.0 0.0 0.4

6-Week 12/24/2020 0.080 3.38 30.0 55.6 8.2 36.1 0.0 0.0 0.4

6-Week 12/31/2020 0.085 3.66 30.0 46.3 2.5 51.2 0.0 0.0 0.4

15-Week 10/13/2020 0.100 3.45 25.0 59.8 2.6 37.6 0.0 0.0 0.8

15-Week 10/20/2020 0.105 3.52 25.0 55.9 3.0 41.1 0.0 0.0 0.8

15-Week 10/27/2020 0.100 3.84 25.0 57.9 9.6 32.5 0.0 0.0 0.8

15-Week 11/3/2020 0.095 4.08 25.0 37.2 9.5 53.2 0.0 0.0 0.8

15-Week 11/10/2020 0.100 3.36 25.0 62.8 6.0 31.2 0.0 0.0 0.8

15-Week 11/17/2020 0.095 3.78 25.0 55.3 5.2 39.5 0.0 0.0 0.8

15-Week 11/24/2020 0.090 3.90 25.0 54.8 8.8 36.3 0.0 0.0 0.8

15-Week 12/1/2020 0.085 4.35 25.0 38.0 3.3 58.7 0.0 0.0 0.8

15-Week 12/8/2020 0.085 3.94 25.0 47.2 4.5 48.3 0.0 0.0 0.8

15-Week 12/15/2020 0.085 3.70 25.0 57.1 6.0 36.9 0.0 0.0 0.8

15-Week 12/22/2020 0.085 3.82 25.0 43.2 2.9 54.0 0.0 0.0 0.8

15-Week 12/29/2020 0.090 3.62 25.0 41.3 9.6 49.1 0.0 0.0 0.8

15-Week 1/5/2021 0.090 3.55 25.0 56.1 4.6 39.3 0.0 0.0 0.8

Bills (cont.)
45

*Weighted averages of competitive awards.

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

Stop 

Out 

Rate 

(%)*

Bid-to-Cover 

Ratio*

Competitive 

Awards ($bn)

% Primary 

Dealer* % Direct* % Indirect*

NonCompetitiv

e Awards 

($bn)

SOMA "Add 

Ons" ($bn)

10-Year 

Equivalent 

($bn)**

17-Week 10/8/2020 0.105 3.13 30.0 67.3 4.6 28.1 0.0 0.0 1.0

17-Week 10/15/2020 0.110 3.36 30.0 47.3 2.2 50.5 0.0 0.0 1.0

17-Week 10/22/2020 0.105 3.54 30.0 57.6 2.5 39.9 0.0 0.0 1.0

17-Week 10/29/2020 0.100 3.26 30.0 74.2 4.9 20.9 0.0 0.0 1.0

17-Week 11/5/2020 0.105 3.20 30.0 70.7 4.6 24.8 0.0 0.0 1.0

17-Week 11/12/2020 0.100 3.77 30.0 52.0 5.1 42.9 0.0 0.0 1.0

17-Week 11/19/2020 0.095 3.82 30.0 58.2 9.1 32.7 0.0 0.0 1.0

17-Week 11/27/2020 0.090 3.48 30.0 54.9 3.5 41.6 0.0 0.0 1.0

17-Week 12/3/2020 0.090 3.57 30.0 65.3 2.9 31.9 0.0 0.0 1.0

17-Week 12/10/2020 0.080 3.58 30.0 52.4 9.9 37.7 0.0 0.0 1.0

17-Week 12/17/2020 0.085 3.47 30.0 56.3 7.8 35.9 0.0 0.0 1.0

17-Week 12/24/2020 0.090 3.42 30.0 53.5 5.4 41.1 0.0 0.0 1.0

17-Week 12/31/2020 0.095 3.73 30.0 39.6 2.2 58.2 0.0 0.0 1.0

22-Week 10/13/2020 0.110 3.17 30.0 58.8 2.0 39.2 0.0 0.0 1.3

22-Week 10/20/2020 0.120 3.25 30.0 52.1 2.4 45.5 0.0 0.0 1.3

22-Week 10/27/2020 0.115 3.61 30.0 46.1 13.5 40.3 0.0 0.0 1.3

22-Week 11/3/2020 0.105 3.23 30.0 56.8 2.4 40.7 0.0 0.0 1.3

22-Week 11/10/2020 0.105 3.55 30.0 58.1 4.3 37.7 0.0 0.0 1.3

22-Week 11/17/2020 0.100 3.38 30.0 59.3 4.1 36.6 0.0 0.0 1.4

22-Week 11/24/2020 0.090 3.47 30.0 64.1 10.3 25.6 0.0 0.0 1.3

22-Week 12/1/2020 0.090 3.65 30.0 40.5 3.0 56.5 0.0 0.0 1.3

22-Week 12/8/2020 0.090 3.84 30.0 43.7 2.2 54.1 0.0 0.0 1.3

22-Week 12/15/2020 0.090 3.51 30.0 56.5 5.9 37.7 0.0 0.0 1.3

22-Week 12/22/2020 0.090 3.28 30.0 63.1 6.9 30.0 0.0 0.0 1.3

22-Week 12/29/2020 0.095 3.48 30.0 42.0 5.5 52.5 0.0 0.0 1.3

22-Week 1/5/2021 0.090 3.52 30.0 61.6 4.9 33.4 0.0 0.0 1.4

Bills (cont.)
46

*Weighted averages of competitive awards. 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)**

5-Year TIPS 10/30/2020 (1.320) 2.66 17.0 16.7 20.5 62.8 0.0 0.0 8.9

5-Year TIPS 12/31/2020 (1.575) 2.86 15.0 27.1 8.7 64.2 0.0 2.3 8.8

10-Year TIPS 11/30/2020 (0.867) 2.71 12.0 14.1 16.5 69.3 0.0 1.7 13.8

TIPS 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 11/2/2020 0.151 2.41 53.9 32.0 15.6 52.4 0.1 5.7 12.6

2-Year 11/30/2020 0.165 2.71 55.9 38.3 15.7 46.0 0.1 7.8 13.4

2-Year 12/31/2020 0.137 2.45 57.9 33.3 17.5 49.2 0.1 8.8 14.1

3-Year 10/15/2020 0.193 2.44 52.0 31.7 12.6 55.7 0.0 1.5 16.8

3-Year 11/16/2020 0.250 2.40 53.9 46.8 14.3 38.9 0.1 14.8 21.8

3-Year 12/15/2020 0.211 2.28 55.9 34.9 15.9 49.3 0.1 2.4 18.4

5-Year 11/2/2020 0.330 2.38 55.0 24.1 14.0 61.9 0.0 5.8 31.8

5-Year 11/30/2020 0.397 2.38 57.0 29.2 14.3 56.5 0.0 7.9 33.7

5-Year 12/31/2020 0.394 2.39 59.0 24.9 18.0 57.1 0.0 9.0 35.7

7-Year 11/2/2020 0.600 2.24 53.0 24.9 14.3 60.9 0.0 5.6 42.5

7-Year 11/30/2020 0.653 2.37 56.0 19.5 15.1 65.4 0.0 7.8 45.8

7-Year 12/31/2020 0.662 2.31 59.0 22.7 17.0 60.3 0.0 9.0 49.3

10-Year 10/15/2020 0.765 2.47 35.0 22.9 14.2 62.9 0.0 1.0 35.9

10-Year 11/16/2020 0.960 2.32 41.0 32.0 13.1 54.8 0.0 11.2 52.9

10-Year 12/15/2020 0.951 2.33 38.0 23.0 14.7 62.3 0.0 1.6 39.5

20-Year 11/2/2020 1.370 2.43 22.0 21.5 15.6 62.9 0.0 2.3 45.1

20-Year 11/30/2020 1.422 2.27 27.0 23.5 15.3 61.2 0.0 3.7 56.0

20-Year 12/31/2020 1.470 2.39 24.0 26.0 17.7 56.3 0.0 3.7 50.5

30-Year 10/15/2020 1.578 2.29 23.0 23.0 15.0 62.0 0.0 0.6 60.0

30-Year 11/16/2020 1.680 2.29 27.0 21.6 16.5 61.9 0.0 7.4 86.2

30-Year 12/15/2020 1.665 2.48 24.0 17.4 16.8 65.9 0.0 1.0 62.1

2-Year FRN 11/2/2020 0.055 3.22 26.0 42.1 0.3 57.6 0.0 2.8 0.0

2-Year FRN 11/27/2020 0.053 2.90 24.0 47.1 5.4 47.5 0.0 0.0 0.0

2-Year FRN 12/28/2020 0.060 2.83 24.0 49.1 2.0 48.9 0.0 0.0 0.0

Nominal Coupons
Treasury Borrowing Advisory Committee

Charge: What are the implications of the current abundant reserve 

environment for Treasury issuance? Are there significant differences 

between the current abundant reserve environment compared to previous 

periods of abundant reserves that Treasury should consider? How does an 

abundant reserve environment affect private demand for Treasuries at 

different maturities?

February 2, 2021
Executive Summary

2

 Large scale asset purchases (LSAPs) by the Fed, and in turn reserve creation, have contributed to a 

favorable backdrop for Treasury issuance

 Reserves are projected to increase sharply in 2021 driven by the continuation of the LSAPs and reduction 

in the Treasury General Account (TGA) balance

 Reserve creation leads to deposit growth in the banking system which, in turn, leads to increased bank 

demand for Treasuries

 The current period of reserve creation is resulting in a build-up of excess liquidity on bank balance sheets; 

it also coincides with a period of historically low yields and credit spreads

 We project sharp increases in bank securities purchases with a significant portion in short to intermediate 

Treasuries

 Reserve growth should also be supportive of non-bank private sector demand for Treasuries 

 Notably, continued growth in reserves is likely to bolster money market fund balances and lead to 

increased demand for T-bills

 However, continued growth in reserves negatively impacts Tier 1 Leverage, SLR, and GSIB surcharge 

calculations and could constrain bank balance sheet capacity for repo and Treasury inventory 
Reserve balances at the Fed are set to increase sharply over the 

next two years

3

Sources: Federal Reserve (H.4.1), Federal Reserve Bank of New York’s Survey of Primary Dealers, Bloomberg Economist Survey (top chart and bottom table)

0

2

4

6

8

10

$ tn Fed’s Balance Sheet

Fed's Total Assets

Reserves from Depository Institutions

LSAP

#1

LSAP

#2

LSAP

#3 Tapering LSAP#4

 Continued asset purchases by the Fed will 

lead to significant additional growth in reserve 

balances

 The Treasury General Account (TGA) is likely 

to decline from its current elevated level and 

will result in an increase in reserve balances

 Historically the TGA balance has been much 

smaller and we assume that it reverts to $800 

bn by the end of 2021 as suggested by 

previous Treasury borrowing estimate 

announcements

 LSAPs are projected to continue at current 

pace in 2021 before tapering in 2022

 Finally, we assume currency grows at the rate 

of nominal GDP in 2021 and 2022

 In the median scenario, we project reserve 

balances to increase by over $2.1 tn in 

2021 and by about $500 bn in 2022

Projected Federal Reserve Balance Sheet

Year-over-Year Change

Actual

Levels Median 25th

Percentile

75th

Percentile

$bn 2019 2020 2021 2022 2021 2022 2021 2022

Total Assets 4,214 7,411 1,441 618 1,191 203 1,442 925 

Treasury 2,329 4,689 960 465 823 180 960 623 

MBS 1,420 2,039 481 153 368 23 482 302 

Other 465 683 

Total Liabilities 4,214 7,411 1,441 618 1,191 203 1,442 925 

Currency 1,802 2,087 129 122 129 122 129 122 

TGA 352 1,614 (814) -814 (814)

Other 411 568 

Reserve Balance 1,648 3,143 2,125 496 1,875 81 2,126 803 

Asset Growth: Based on Federal Reserve Bank of New York’s Survey of Primary Dealers

TGA: Shrinks to $800bn per Treasury guidance

Currency growth: Follows Bloomberg Economist Survey Nominal GDP growth of 6.2% in 

2021 and 5.5% in 2022
Reserve creation by the Fed has contributed to a significant 

increase in deposits in the banking system

 Large scale asset purchases (LSAPs) by the Fed are 

funded by creating reserves

 When the Fed purchases a security from a non-bank 

private sector entity it results in the creation of a bank 

deposit

 When banks make loans or purchase Treasuries it also 

results in the creation of bank deposits; deploying 

reserves into loans or Treasuries has a multiplier effect 

on deposit creation

 Past periods of reserve creation have resulted in large 

increases in bank deposits 

 Until 2007, deposits in the banking system had 

increased in line with loans. Since the inception of 

LSAPs, deposit growth has consistently and 

significantly outpaced the rate of loan growth

 Furthermore, these deposits in recent years have 

tended to be sticky and have largely stayed in the 

banking system

 In the median scenario, we project about $2.6 tn of 

increases in deposits in the US banking system

4

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

$bn

US Commercial Banks Deposits Versus Loans, 

Excess Reserves and Treasury Securities

Loans Excess Reserves Treasury Securities Deposits

Sources: Federal Reserve (H.3, H.4.1, H.6, H.8) (top chart and bottom table)

Projected Reserve Increases Lead to Deposit Growth

Year-over-Year Change

Actual

Levels Median 25th

Percentile

75th

Percentile

$bn 2019 2020 2021 2022 2021 2022 2021 2022

Federal Reserve Balance Sheet

Reserve Balance 1,648 3,143 2,125 496 1,875 81 2,126 803 

US Commercial Bank Balance Sheets

Deposits 13,350 16,238 2,125 496 1,875 81 2,126 803 

* Beta of 1 used. Refer to Appendix for regression analysis supporting relationship
Rapid deposit growth in the banking system is likely to create 

demand for duration

 Bank deposits are liabilities and typically add negative 

duration to the balance sheet

 Banks typically hedge the duration risk associated 

with deposits by buying/originating fixed rate assets 

or via the use of derivatives 

 Deposits created in a period of increasing reserves 

tend to be large institutional deposits (“non-core”); 

these deposits tend to exhibit higher run-off rates and 

greater re-pricing sensitivity to rate changes than 

traditional retail deposits and hence have a shorter 

duration

 There are significant differences in modeled duration 

for different deposit cohorts; traditional retail deposits 

durations range from 3 to 7-years while “non-core” 

deposit durations are about 2-years

 Estimates of deposit duration vary significantly across 

banking institutions and therefore we estimate 

demand under different duration assumptions

 Using a 2-year duration estimate, we project 

demand of $1.3 to $2.0 tn in 3-year equivalents

5

Sources: SNL and Bloomberg (top chart). US GSIBs include BAC, BK, C, GS, JPM, MS, STT, WFC

Projected 3-year Equivalents Demand ($bn)

Deposit

Duration

Median

(2021 & 2022)

25th Percentile

(2021 & 2022)

75th Percentile

(2021 & 2022)

1 years 880 656 983 

2 years 1,759 1,313 1,965 

3 years 2,639 1,969 2,948 

* 3-year duration = 2.98

0.0

0.5

1.0

1.5

2.0

2.5

3.0

%

Median US GSIB Deposit Cost versus Fed 

Funds Target Rate

Deposit Cost Fed Funds Target Rate
Key differences in this current abundant reserve period relative to 

prior periods

 During past LSAPs, banks were in the process of 

building HQLA to comply with new liquidity 

regulations; higher reserves at the Fed played a 

significant part in banks’ ability to meet these 

requirements

 The current period of reserve creation is resulting in 

a build-up of excess liquidity providing banks 

flexibility to deploy the cash reserves into higher 

yielding assets

 The total amount of excess liquidity is understated 

in reported holding company LCR due to 

transferability rules between holding company and 

bank subsidiaries which caps the LCR benefit of 

excess liquidity held at the bank

 We estimate that bank HQLA has grown $1.2 tn

since 2019Q3 which equates to an “uncapped” LCR 

of 144% highlighting the amount of liquidity 

available to banks

 The current period of reserve creation coincides 

with historically low term and credit risk premiums

6

Sources: Bank LCR Disclosures and SNL (top chart), Bloomberg and JP Morgan (bottom table) 

Average Term Premium and JULI Spread in Reserve Periods

10Y ACM Term 

Premium (%)

JULI Spread to 

Treasury (bps)

9/30/2008 – 12/31/2011 2.21 255 

1/31/2012 – 8/31/2014 1.14 163 

10/31/2019 – 12/31/2020 (0.66) 175 

0

500

1,000

1,500

2,000

2,500

3,000

3,500

100

110

120

130

140

150

% $ bn

Reported and Estimated Uncapped LCR* versus 

Excess Reserves

Estimated Uncapped LCR (LHS) Reported LCR (LHS)

Excess Reserves (RHS)

* Uncapped LCR is estimated by adding the quarterly change in estimated bank HQLA from 

call reports to the 2019Q3 BHC Reported HQLA divided by the BHC Reported NCOs. More 

details can be found in the Appendix
Tepid loan growth and asset sensitive balance sheets will likely 

require banks increase securities portfolios

7

 Loan growth has historically been slow in the 

first couple of years of an economic recovery

 We expect loan growth to be tepid in 2021 

and loan balances to increase only modestly

 Slow loan growth would further support bank 

demand for securities given the lack of 

investment opportunities and amount of 

excess liquidity

 Record low interest rates combined with 

strong deposit growth has resulted in bank 

balance sheets becoming very asset 

sensitive and creating demand for duration

 Banks have historically owned Treasuries in 

the short-to-intermediate part of the curve; 

aggregated US GSIB Treasury holdings 

show that over 75% have a maturity of less 

than 5 years

Sources: Federal Reserve (H.8) and National Bureau of Economic Research (top chart), US GSIB 10Ks/10Qs (tables) 

0

2

4

6

8

10

1 2 3 4 5 6

%

Years after end of NBER defined Recession

US Commercial Bank Annual Loan Growth

Average of Past 3 Recoveries

US GSIB Weighted Average NII Sensitivity:

% Change over the Next 12 Months

2020Q3 2017Q4 2007Q4 2006Q4 2005Q4

Instantaneous +100 bps 13.4 5.7 -1.7 -2.8 -0.8

Gradual +100 bps 12.2 3.3 -1.0 -1.2 -0.4

Gradual +200 bps 16.1 2.9 3.6 NA NA

US GSIB Holdings of US Treasury & Government Agencies:

Contractual Maturity Distribution (% of Carrying Value)

As of: 9/30/2020

<= 1 

Year

>1 Year;

<= 5 

Years

>5 Years;

<= 10 

Years

> 10 

Years

Estimated 

WAL

(years)

Estimated Total WAL (years) 0.5 3.0 7.5 12.0 3.6

Total (%) 21.9 55.6 19.5 3.1 100.0

Total ($bn) 155.4 394.7 138.6 21.7 710.3
We expect banks to increase securities purchases in 2021 which 

could be an important source of demand for Treasuries

8

 Banks have accelerated the pace at which they 

added securities in 2020, but cash reserves are still at 

record levels and expected to grow sharply in 2021 

and 2022

 We expect steady growth in banks’ securities 

portfolios with accelerated purchases if rates rise

 Overall, we project incremental bank demand for fixed 

income assets to increase by about $1.8 tn over the 

next two years

 Given historically tight credit spreads, we expect 

private label securities to remain a small portion of 

these securities purchases

 With low term premiums and yield levels, and given 

banks’ preferred habitat, we expect most of the 

incremental bank demand for duration to 

materialize in short and intermediate Treasuries

 Balance sheet flexibility may also provide increased 

demand for short-dated Treasuries and Treasury 

asset swaps which will help keep swap spreads 

stable despite significant expected increases in net 

issuance

Sources: Federal Reserve (H.3, H.6, H.8) (top chart)

-1,000

-500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

$bn

US Commercial Banks Annual Change in Bank 

Reserves, Securities and Deposits

Excess Reserves Securities Deposits

Bank HQLA/Securities Matrix

Asset Type Liquidity/

HQLA Duration Yield/Income

Central Bank Balances Highest Zero Low

T-bills/Reverse Repos Very High Very Low Low

Treasury asset swaps High Zero Low/Medium

T-notes High Low/Medium/High Low/Medium

Agency MBS High Medium Medium

Private Label Low Medium Medium
Reserve growth is also consistent with increased non-bank private 

demand 

 Non-bank private demand for Treasuries is affected 

by LSAPs, which are the mechanism that drives 

reserve creation. Money manager portfolios are 

liquefied by selling Treasury holdings to the Fed, 

and they may seek to redeploy those available 

funds into Treasuries or other fixed income sectors

 While multi-asset managers can reallocate LSAP 

proceeds to a wider range of assets, government 

bond portfolio managers, including passive index 

funds, will likely reinvest across the Treasury curve 

due to their investment criteria

 This persistent demand, and the increased interest 

in purchasing Treasuries if yields move higher, 

could be contributing to the low level of the term 

premium. The term premium often increases during 

a recession and early into an economic recovery, 

but it has remained well below historical norms 

despite heavy increases in the issuance calendar

 The abundant reserves environment may be 

helping to keep term premiums low despite 

heavy issuance

9

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0 4 8 12 16 20 24 28 32 36 40 44 48

%

Months after becoming accommodative

10Yr US Treasury Yield Minus 6 Month Forward 

Fed Funds Rate 

Early '90s Early 2000's Great Recession Current

Sources: Federal Reserve Bank of New York (top chart), Bloomberg, JP Morgan, Federal Reserve Bank of New York (bottom chart). Policy is defined as accommodative when the 6M Forward Fed Funds Rate minus Core PCE 

Inflation is less than the Laubach-Williams One-sided Estimate of the Natural Rate of Interest 

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

% ACM 10Y Treasury Term Premium
A rising reserve environment bolsters growth in money market funds, 

leading to increased T-bill demand

 In a period of rapid reserve growth, some of the banking system liquidity is likely to migrate to money market fund 

(MMF) balances as depositors / cash managers diversify their short-term liquidity portfolios 

 Money market fund investments must remain on the short end of the curve, and in recent years most of the asset 

growth has come in T-bills

 Government and Prime MMF’s allocation to T-bills has increased to more than 50%. MMFs now own ~40% of T-bills 

outstanding, up from 15% a few years ago

 Increased flows to MMFs and their increased allocation to T-bills has driven T-bill yields lower 

 Potential negative T-bill yields driven by an increase in demand could create challenges for MMFs from a business 

model perspective

10

Sources: Office of Financial Research and Factors Affecting Reserve Balances - H.4.1 (left chart), Federal Reserve Money Market Funds: Investment Holdings Detail and Bloomberg (right chart)

 -

 0.50

 1.00

 1.50

 2.00

 2.50

 3.00

 3.50

0

1

2

3

4

5

6

$bn $ tn MMF Growth by Category

Prime (LHS) Government (LHS) Reserves (RHS)

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

0

10

20

30

40

50

60

70

80

90

100

% Government MMF Holdings %

U.S. Treasuries (LHS) U.S. Agencies (LHS)

U.S. Treasury repo (LHS) U.S. Agency repo (LHS)

Other assets (LHS) 3-Mo T-Bill Yield (RHS)

3M OIS (RHS)
1) Other Includes individuals, GSE, brokers and dealers, bank personal trusts and estates, businesses, pension funds, insurance companies, US saving bonds, state and local governments and other investors.

Sources: Bloomberg (top right), Federal Reserve Bank of New York, Research and Statistics Group, “Quarterly Trends for Consolidated U.S. Banking Organizations” (bottom right). Treasury Bulletin (bottom left)

11

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

% SOFR Rate - IOER

Abundant reserves and deposits support repo financing of growing 

Treasury supply, given current bank balance sheet capacity 

 Current deposit and repo market capacity reliably 

supports financing needs across US Treasury 

ownership sectors

 Short-term disruption in repo market was initially 

supported by the Federal Reserve’s 3/12/20 

announcement of asset purchases and term repo 

operations to address temporary market 

disruptions. The subsequent LSAPs ultimately 

increased bank liquidity creating capacity for repo 

and Treasury purchases

11.0

12.0

13.0

14.0

15.0

16.0

1.0

1.2

1.4

1.6

1.8

2.0

2.2

$ tn Reverse Repo and Deposits $ tn

Reverse Repo (LHS) Deposits (RHS)

0

5

10

15

20

25

30

$ tn Ownership of US Treasury Securities

Depositary Institutions Mutual Funds

Federal Reserve and Government accounts Foreign and International

Other1
Increased reserves are putting pressure on bank capital ratios which 

could reduce capacity for deposits and repos in the future 

12

 Temporary exclusion of US Treasuries and deposits at Federal 

Reserve Banks from SLR calculations is scheduled to expire on 

March 31st

 Without this, SLR ratios are expected to drop by ~ 60 bps in Q3 

2020 despite capital growth from curtailment of buybacks

 Excluding US Treasuries and deposits at Federal 

Reserve Banks would have improved the 

Leverage ratio by approx. ~ 80 bps in Q3 2020

G-SIB Bank Q3 2020 Potential to 

increase in 2022

JP Morgan Chase 3.50% 

Citigroup 3.00% 

BNY Mellon 1.50% 

Morgan Stanley 3.00% 

Goldman Sachs 2.50% 

Bank of America 2.50% 

Wells Fargo 2.00% 

State Street 1.00% 

 G-SIB Surcharge impact driven by reserve and related 

deposit growth  Reserves were significantly lower when capital rules and 

surcharges were calibrated. 

 If SLR, Tier 1 Leverage, and CET1 capital ratio 

requirements become binding driven by reserve growth, 

banks will be required to issue debt and/or retain higher 

equity to maintain regulatory compliance. 

 As a result, balance sheet availability for deposit growth 

and repo financing becomes increasingly expensive

 We expect these costs would be passed on to depositors 

and repo counterparts

4

5

6

7

8

9

10

11

% SLR

Weighted Average Average without Exclusions

4

5

6

7

8

9

10

11

12

13

% Leverage Ratio

Weighted Average Average if SLR exclusions existed

Sources: SNL- sample includes 5 largest Money Centers, 3 largest Custody Banks and 12 Regional Banks (top right and left charts), Barclays Research (bottom left table)
Conclusions

13

 Reserve balances at the Fed, which are already historically high, are likely to grow sharply 

over the next two years

 The abundant reserves contribute to a favorable environment to absorb Treasury issuance 

 Reserve creation is likely to drive strong bank demand for Treasuries

 We expect most of the bank demand to materialize in the short and intermediate part of the 

curve

 Abundant reserve balances have led to growth in money market funds and in turn 

increased demand for T-bills

 A sharp reduction in TGA balances accompanied by a reduction in T-bill issuance may 

result in lower T-bill yields

 Continued growth in reserves may constrain bank balance sheet capacity as leverage and 

capital ratios approach regulatory minima
Appendix

14
Bank guidance and commentary indicates caution on incremental 

investment risk

15

 In the Sep 2020, Senior Financial Officer Survey1, which aggregates responses of 80 banks representing 

75% of total reserve balances. Referring to the elevated levels of reserves during Q2 2020, Bank officials 

noted:

− Banks hold high reserve balances to be prepared for potential drawdowns on committed credit lines or a desire to conduct 

asset/liability matching, given a large inflow of deposits with potentially high runoff rates or both

− Second most important driver of reserve accumulation is a lack of attractive alternative investment opportunities

− Domestic survey respondents expect a decrease in their reserve levels relative to August 2020 citing: Concerns over Net 

Interest Margin, increase in the expected return on alternative HQLA vs IOER

− Actions cited to reduce reserves: On the asset side, increase securities portfolio, both non-HQLA and HQLA. On the 

liabilities side, allow wholesale funding to mature without replacing it.

 During Q4 2020 Earnings2 Bank executives commented on how they expect to deploy liquidity:

− Referring to excess liquidity, JP Morgan said “the theme is we're being opportunistic but patient [...] And as we think about 

managing the balance sheet, it's not just about NII. Of course, it's about capital. And so, there is risk in adding duration at 

these levels in a further sell-off. So, we're being very patient.”

− Citigroup said “We intend to continue to grow as it relates to increasing those deposits. And we've been smart about how 

we've been managing our liquidity, keeping some liquidity obviously there for lending needs [..] but also paying down 

wholesale debt. We did that through the year and also investing”

− State Street said “We will be opportunistic from here, regarding the deployment of cash and the expansion of our 

investment portfolio, but we also need to be mindful of currently tight credit spreads and the potential for OCI risk from 

interest rate changes”

− Bank of America said “the balance sheet expanded $81 billion versus Q3 to $2.8 trillion in total assets. The main point is 

that deposits are driving and funding substantially all of this growth. Deposits grew $93 billion in the quarter and are up 

$361 billion from Q4 '19. On the other hand, loans declined from Q3, with deposits up loans down excess liquidity is piling 

up in our cash and securities portfolios”

1) https://www.federalreserve.gov/data/sfos/files/senior-financial-officer-survey-202009.pdf

2) Transcripts sourced from Bloomberg
Balance Sheet of Commercial Banks in the United States

16

Sources: Federal Reserve (H.3, H.6, H.8)

Federal Reserve Balance Sheet ($bn) 2000 2005 2007 2009 2012 2014 2017 2018 2019 2020 13yr chg 1yr chg

Excess Reserves 1 2 2 1,075 1,459 2,524 2,121 1,568 1,491 3,135 3,133 1,644 

Assets and Liabilities of Commercial Banks in the United States ($bn)

Total Assets 6,136 8,814 10,883 11,776 13,140 15,050 16,789 17,050 17,856 20,648 9,765 2,793 

Cash incl. Central Bank Balances 306 336 325 1,233 1,696 2,797 2,407 1,916 1,784 3,228 2,903 1,443 

Securities 1,183 1,840 2,090 2,324 2,743 2,944 3,447 3,509 3,842 4,715 2,625 873 

Treasury & Agency Securities 790 1,144 1,128 1,448 1,879 2,050 2,535 2,677 3,014 3,750 2,622 736 

MBS 1,006 1,347 1,403 1,822 1,878 2,084 2,529 2,529 446 

Non-MBS 442 532 647 713 799 930 1,220 1,220 290 

Other Securities 393 695 962 876 864 894 912 832 828 965 3 137 

Loans 3,710 5,232 6,493 6,482 6,932 7,644 9,150 9,623 10,080 10,417 3,924 338 

Other Assets 938 1,406 1,975 1,737 1,769 1,664 1,785 2,002 2,150 2,289 313 138 

Total Liabilities 5,613 7,929 9,753 10,465 11,638 13,428 14,941 15,159 15,879 18,665 8,912 2,786 

Deposits 3,764 5,625 6,720 7,758 9,335 10,550 12,074 12,517 13,350 16,238 9,517 2,888 

Borrowings 1,186 1,635 2,122 1,893 1,535 1,757 2,081 1,946 1,967 1,688 (435) (279)

Other Liabilities 664 669 910 814 767 1,121 787 697 562 739 (171) 178 

Equity 523 884 1,130 1,311 1,502 1,621 1,848 1,890 1,977 1,984 853 7 

HQLA Eligible Assets* 1,096 1,480 1,453 2,680 3,575 4,847 4,943 4,593 4,798 6,977 5,524 2,179 

Deposits – Loans 54 393 227 1,275 2,403 2,905 2,924 2,894 3,271 5,820 5,593 2,550 

Deposits – Loans – Treasury** 833 1,871 2,258 2,211 2,095 2,341 4,600 2,259 

Nominal GDP*** 10,439 13,332 14,682 14,628 16,359 17,850 19,938 20,910 21,747 21,157 6,476 (590)

Ratios (%)

Loans/Deposits 98.6% 93.0% 96.6% 83.6% 74.3% 72.5% 75.8% 76.9% 75.5% 64.2% -32.5% -11.3%

Cash/Total Assets 5.0% 3.8% 3.0% 10.5% 12.9% 18.6% 14.3% 11.2% 10.0% 15.6% 12.6% 5.6%

Treasury+Agency/Total Assets 12.9% 13.0% 10.4% 12.3% 14.3% 13.6% 15.1% 15.7% 16.9% 18.2% 7.8% 1.3%

Treasury/Total Assets 3.8% 4.0% 4.3% 4.2% 4.7% 5.2% 5.9% 5.9% 0.7%

Treasury+Agency/Total Securities 66.8% 62.2% 54.0% 62.3% 68.5% 69.6% 73.6% 76.3% 78.5% 79.5% 25.6% 1.1%

Treasury/Total Securities 19.0% 19.4% 22.0% 20.7% 22.8% 24.2% 25.9% 25.9% 1.7%

*** HQLA Eligible Assets include Cash and Treasury and Agency Securities

*** Non-MBS Treasury and Agency Securities used as proxy for Treasury Securities

*** GDP is only updated through 2020Q3
Structural liquidity increased with reserves despite stable reported 

LCR

17

0

500

1,000

1,500

2,000

2,500

3,000

3,500

100

110

120

130

140

150

% $ bn

Reported and Estimated Uncapped LCR versus Excess 

Reserves

Reported LCR (LHS) Estimated Uncapped LCR (LHS)

Excess Reserves (RHS)

 Reported holding company HQLA has 

increased significantly less than reserves 

due to transferability rules between holding 

company and bank subsidiaries

− Excess liquidity in bank subsidiaries 

above their standalone LCR requirement 

are excluded from the holding company 

HQLA per LCR rules

 This has resulted in a large amount of 

“capped” liquidity in bank subsidiaries 

leading to the reported LCR understating the 

total amount of liquidity

 HQLA eligible assets on bank subsidiary 

balance sheets are estimated to have grown 

by $1.2 tn between 2019Q3 and 2020Q3, in 

line with the growth in reserves

 We estimate that the “uncapped” HQLA has 

grown in line with bank HQLA eligible assets 

and reserves. The “uncapped” LCR is 

estimated at 144% highlighting the total 

amount of liquidity available to banks

Sources: SNL, Federal Reserve (H.3, H.6). Banks include BAC, BK, COF, C, GS, JPM, MS, NTRS, PNC, STT, USB, WFC

($bn) 2019Q3 2019Q4 2020Q1 2020Q2 2020Q3 Change

Federal Reserves 1,427 1,648 2,348 2,938 2,743 1,316

Reported BHC HQLA 2,582 2,648 2,711 3,068 3,157 575

Reported BHC NCO 2,179 2,231 2,282 2,522 2,598 419

Reported BHC LCR (%) 118.5 118.7 118.8 121.6 121.5 3.0

Reported BHC Liquidity Surplus 403 417 429 546 559 156

Estimated Bank HQLA* 2,492 2,555 3,128 3,531 3,651 1,159

QoQ Change 64 572 403 119

Estimated Uncapped HQLA** 2,582 2,646 3,218 3,621 3,741 1,159

Reported BHC NCO 2,179 2,231 2,282 2,522 2,598 419

Estimated Uncapped LCR (%) 118.5 118.6 141.0 143.6 144.0 25.5

Uncapped Liquidity Surplus 403 414 936 1,100 1,143 740

** Estimated using Federal Reserve Balance, Balance due from Foreign Banks, US Treasury and 

Agency MBS from Call Report. Does not include Foreign Gov’t securities or impact of pledges

** Estimated by applying quarterly change in Estimated Bank HQLA to 2019Q3 Reported HQLA
Details on regression statistics for drivers of total Commercial 

Bank deposits

 Dependent variable: Total commercial bank 

deposits in the US (Deposits)

 Independent variables: Total loans and leases at 

commercial banks in the US (Loans) and total 

reserves had at the Federal Reserve (FRB 

Reserves)

 Regression fitted on level values over the time 

horizon of 1973 to 2014 to capture the impact of 

reserve growth on deposit growth during periods 

where the Fed’s balance sheet was increasing

 Coefficients robust to changes in sample horizon

 Data in the regression is quarterly and the units are 

billions. Quarterly series derived by taking the 

average of the underlying monthly values within 

each quarter

18

0

2,000

4,000

6,000

8,000

10,000

12,000

$bn

Deposits to Loans, Excess Reserves and 

Treasury Securities

Deposits Fitted Values

Sources: Federal Reserve (H.3, H.6, H.8)

Regression Statistics

Dependent Variable: Deposits

Intercept 238.731***

Loans 0.996***

FRB Reserves 0.986***

RR2 0.997

Freq. Quarterly

Sample 1973Q1-2014Q4

*** p-value<0.01; ** p-value<0.05

Dependent variable is total commercial bank deposits held by commercial banks. 

Regressors include total commercial bank loans and total FRB reserves. All data in billions 
Federal Reserve Bank of New York’s Survey of Primary Dealers: 

LSAP Projections

19

Sources: Federal Reserve Bank of New York

Net Purchases of U.S. Treasury securities ($bn)

Dec 

2020

Jan 

2021

Feb 

2021

Mar 

2021

Apr 

2021

May 

2021

June 

2021

2021 

H2

2022 

H1

2022

H2

2023

H1

2023 

H2

25th Percentile 80 80 80 80 80 80 80 343 175 5 0 0

Median 80 80 80 80 80 80 80 480 285 180 10 0

75th Percentile 80 80 80 80 80 80 80 480 383 240 120 100

Net Purchases of agency MBS ($bn)

Dec 

2020

Jan 

2021

Feb 

2021

Mar 

2021

Apr 

2021

May 

2021

June 

2021

2021 

H2

2022 

H1

2022

H2

2023

H1

2023 

H2

25th Percentile 40 40 40 40 40 40 40 128 23 0 0 0

Median 40 40 40 40 40 40 40 240 128 25 0 0

75th Percentile 40 40 40 40 40 40 40 240 191 110 50 0

Net Purchases of agency CMBS ($ millions)

Dec 

2020

Jan 

2021

Feb 

2021

Mar 

2021

Apr 

2021

May 

2021

June 

2021

2021 

H2

2022 

H1

2022

H2

2023

H1

2023 

H2

25th Percentile 26 0 0 0 0 0 0 0 0 0 0 0

Median 100 80 75 75 75 50 50 240 50 0 0 0

75th Percentile 150 125 125 125 125 125 125 750 450 225 1 0
US GSIBs: Cost of Deposits

20

Sources: SNL and Bloomberg

Rate Paid on Interest-bearing Deposits

Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Sep-20

BAC 0.13 0.11 0.14 0.32 0.67 0.61 0.08

BK 0.03 0.01 -0.01 0.17 0.86 0.73 -0.05

C 0.58 0.54 0.58 0.77 1.27 1.20 0.34

GS 0.40 0.53 0.81 1.24 2.08 1.93 0.77

JPM 0.18 0.13 0.16 0.35 0.73 0.67 0.07

MS 0.17 0.07 0.09 0.26 1.00 0.94 0.30

STT 0.10 0.10 0.04 0.22 0.41 0.32 -0.16

WFC 0.13 0.11 0.18 0.39 0.77 0.85 0.13

Median 0.15 0.11 0.15 0.34 0.82 0.79 0.11

Rate Paid on Total Deposits

Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Sep-20

BAC 0.08 0.07 0.09 0.21 0.46 0.44 0.05

BK 0.02 0.01 -0.01 0.12 0.63 0.58 -0.04

C 0.46 0.42 0.44 0.61 1.04 1.01 0.29

GS 0.39 0.51 0.81 1.20 2.02 1.87 0.76

JPM 0.12 0.09 0.11 0.25 0.53 0.50 0.05

MS - - 0.09 0.26 1.00 0.94 0.30

STT 0.07 0.07 0.03 0.17 0.32 0.27 -0.13

WFC 0.09 0.08 0.12 0.28 0.56 0.63 0.09

Median 0.09 0.08 0.10 0.26 0.60 0.60 0.07
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TBAC Charge

Discuss the movements in swap spreads in both recent months as well as the long-term. What are

the benefits and limitations of comparing fixed rates on fixed-to-float interest rates swaps to interest

rates on Treasury securities? To what extent can swap spreads provide relevant context for

understanding government borrowing costs? What types of interest rate swaps are most relevant

for comparison across Treasury maturities and security types? How do the demand dynamics for

interest rate swaps differ from that of Treasury securities and what are the differences in the

investor base for each product? How does the transition away from LIBOR affect the information

content derived from swap spreads?

February 2021
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• Swap spreads are influenced by a number of factors, and the importance of those factors varies 

across the maturity of the instruments. 

• At the short end, expected conditions in funding markets are important factors, with spreads being 

very responsive to increases in bank funding costs during periods of market stress or changes in 

repo pricing. Front end swap spreads have some sensitivity to changes in Treasury supply, but less 

so than longer maturities because the front end market is very deep and mark-to-market volatility 

per unit of carry is low.

• Across a broader set of maturities, existing and expected future Treasury supply as well as 

thematic changes in secondary market flows can be important factors. In addition, regulatory 

changes, balance sheet cost and availability, and the idiosyncratic behavior of certain cohorts of 

swaps users can each dominate at different times.

• Swap spreads can therefore provide information about the effects of Treasury supply on the pricing of 

those instruments. However, spreads are not a straightforward measure of those effects, as one has 

to take into account the potential influence of all the other factors that affect swap spreads.

• There are advantages to using OIS or SOFR-based swap spreads rather than Libor-based swap 

spreads for deriving information about Treasury supply effects, as using Libor-spreads introduces a 

significant bank credit component. The only advantage of using Libor-based spreads has been the 

deeper liquidity of those swaps historically.

Introduction

2
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Which swap spreads are we talking about? 

Comparison of LIBOR, SOFR, and OIS swap spreads

3 2/1/2021
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Which swap spreads are we talking about?

4

Libor swap curve

OIS swap curve

SOFR swap curve

Source: Barclays Research. Note: Libor is a survey-based measure 

Type Index

Libor 3m Libor

OIS Fed funds effective

SOFR Adjusted SOFR

Description

Unsecured term funding 

rate for banks

Overnight unsecured 

bank lending rate

Treasury repo rate

Liquidity

Longest history, deep 

liquidity, even out to 

longer tenors

Long history, good 

liquidity in short tenors

Short history, liquidity 

still building

Comments

Index spikes during stress, 

rate sourced from survey 

rather than transactions;

publication to cease by June 

2023

Transaction based rate with 

smaller volumes than repo

Most aligned with Treasuries; 

reflects repo market capacity
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Libor vs. OIS and OIS vs. SOFR swaps

5

Historically, the LIBOR - OIS spread 

has been a barometer of credit risk and 

market stress. LIBOR-OIS spikes 

occurred in 2008, 2011, and 2020. 

The OIS - SOFR spread reflects the 

abundance/ scarcity of repo balance 

sheet capacity. The September 2019 

repo shock is an example of SOFR 

trading at much higher levels than OIS.

Source: Barclays Research, Bloomberg. 
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Comparison of UST investors and swap investors 

6 2/1/2021
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The investor base in Treasuries...

7

Table in $B

• The largest holders of Treasuries include overseas official buyers, the Fed, insurers, banks and MMFs. For 

various regulatory or other reasons, many of these holdings can’t be converted into swaps, regardless of price.

• Price sensitive buyers like households (includes hedge funds), banks, and asset managers have grown 

Treasury holdings at a faster pace than the 11% CAGR of the UST market, absorbing a larger percentage of 

Treasury issuance at narrower spreads (higher yields) relative to swaps. 

• Buyers who use Treasuries for ALM or to invest FX reserves exhibit more inelastic demand and have grown 

their holdings at a rate slower than the growth of the market. 

Source: Fed Flow of Funds Data
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...and in swaps. Select investors toggle between both.

8

Swap holdings, in $B of 5yr-equiv swaps

• The largest net ‘receive fixed’ positions in the swaps market include banks, insurers, and pensions. There is limited 

flexibility for most of these positions.

• Insurers or pension funds often prefer swaps because they want to use their balance sheets for other less liquid or 

higher expected return investments. Swaps allow them to manage the duration of their liabilities without using 

balance sheet. 

• Insurers, pensions, banks, VA hedgers, and MBS servicers are all net receivers, and in most cases their receiving 

needs have been increasing as rates have rallied, causing liabilities to extend or assets to shorten in duration. 

• Mortgage hedgers historically are payers, but the decline of the GSE portfolios and the Fed’s QE in the mortgage 

market have significantly reduced the need for mortgage investors to pay, creating an imbalance in the swap market. 

• The result is that net demand to receive swaps has increased, putting downward pressure on spreads to entice the 

investors (hedge funds, banks, dealers) who can toggle between Treasuries and swaps, or explicitly enter swap spread 

positions to offset the organic net receiving demand.

. 
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Rising deficits and increasing Treasury supply have driven 

the downward trend in spreads over the last two decades, 

but other factors are bigger drivers from time to time 

9 2/1/2021
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Treasury supply has been a big driver of swap spreads in US...

10

• Expectations of declining Treasury supply 

drove swap spreads wider from 1999 to 

2001...

• ...but a large increase in supply post GFC 

has helped drive spreads into negative 

territory over the last 12 years.

Source: CBO, Bloomberg, Barclays Research. 

• Changes in the actual and prospective 

supply of Treasury securities have driven 

substantial and sustained changes in swap 

spreads. 

10y CBO deficit expectations vs. swap spreads

Widening deficits reduce fiscal 

scarcity premium in Treasuries

Buy back program 

w idened spreads
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...and in other major G7 countries

11

30y spreads in US, UK, Japan, and Germany

•

• Over the past 20 years, debt stocks have increased in the US, UK, Japan and Germany. Swap spreads have 

tightened in all 4 markets. 

• Germany’s debt stock exhibited the slowest growth, and has had the smallest decline in swap spreads

• Japan’s swap spreads correlate with medium term deficits net of central bank purchases

. Source: Haver Analytics, Bloomberg, Barclays Research

-100

-50

0

50

100

150

200

Jan-00 Jan-03 Jan-06 Jan-09 Jan-12 Jan-15 Jan-18 Jan-21

30y sprd (bp)

Germany UK Japan US

30y spreads in US, UK, Japan, and Germany Multiple of Jan-01 level
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Other factors driving swap spreads: Hedging needs

12

0

10

20

30

40

50

60

70

80

90

100

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03

bp

MBS adjusted duration 5y swap spread (RHS)

-65

-55

-45

-35

-25

-15

-5

5

-4

-3

-2

-1

1

2

Jan-17 Aug-17 Mar-18 Oct-18 May-19 Dec-19 Jul-20

VA paying/receiving proxy 30y swap spread (bp, RHS)

• MBS hedging needs can drive swap spreads in either 

direction, most famously in summer 2003. 

• Post GFC, GSE portfolios shrank and the Fed bought 

MBS, causing net mortgage hedger paying to decline 

significantly. 

• Variable annuity hedging has become a more important 

factor in recent years. 

Source: Barclays Research, Fannie Mae, Freddie Mac, FHFA

MBS index adj duration MBS duration hedging Variable Annuity hedging VA net paying proxy

GSE portfolio size vs 10y swap spreads

VA net paying proxy 30y swap spread (bp, RHS)

MBS adjusted duration 5y swap spread (bp, RHS)
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Other factors: Bank funding concerns, regulatory changes, balance 

sheet availability

13

• In March 2020, long end spreads temporarily collapsed due to market distortions and balance sheet 

pressures. Following a rebound in spread as the market stabilized, long end spreads again narrowed 

in April/May on expectations of increased Treasury issuance.

• Short end spreads initially widened on bank funding concerns, but then receded as the Fed flooded 

the market with ample liquidity.

• Long end spreads widened across the rest of 2020, as balance sheet availability improved, helped by 

both Fed LSAPs and the SLR exemption – a significant regulatory change.

Source: Bloomberg, Barclays Research. 

-70

-60

-50

-40

-30

-20

-20

-10

0

10

20

30

Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21

bp

2y swap sprd (bp) 5y swap sprd (bp) 10y swap sprd (bp) 30y swap sprd (RHS)

Bank 

funding 

concerns

Easing bank 

balance sheet 

constraints

Market distortions & balance 

sheet pressures, followed by 

Fed liquidity injections
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Other factors: Importance of bank balance sheet availability

14

• Balance sheet availability has improved as seen in the lack of arbitrage opportunities in each of:

• The CDS-cash basis in corporates / Deviations from Treasury spline / Covered interest parity 

• As balance sheet becomes more available, banks and hedge funds may deploy capital to buy 

Treasuries and pay fixed, pushing spreads wider. 

• Spread levels and leverage ratios drive this analysis.

• The importance of leverage ratios: At what level of spreads is this spread trade economically 

attractive to banks?

• Cash flow buying Treasury on asset swap: ∑ − ssssssss ssssssssssss + (LLLLLLLL − ) .

• Consider after-tax Return on Equity (assuming x% leverage ratio).

• Hypothetically, assuming Libor-repo = 15bp, 20% tax rate.

• Targeting 5% leverage ratio and >12% RoE, swap spread needs to be <-60bp.

Source: Bloomberg, Barclays Research. 

Corporate bond basis spread Treasury relative value indicator Cross Currency Basis bps RMSE
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Modeling swap spreads: 

Repo drives shorter spreads, deficits drive longer spreads

15 2/1/2021
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What do the models say? 2y swap spreads 

16

• When we model 2y OIS spreads, we find that GC/OIS is a natural anchor for front-end spreads and is the

dominant driver of spread changes. Since 2010, 2y OIS spreads have averaged ~4.5 bps tighter than GC/OIS,

with investors requiring a premium to extend from GC to 2y Treasuries.

• In addition, our model includes IG corporate debt spreads as a proxy for market liquidity, and Excess Reserves

as an additional driver of funding availability. Our model has an R^2 of 39%. While adding a supply variable

would have increased the R^2 incrementally, it would not have been statistically significant, so we omitted it.

• 2y OIS spreads have notably diverged from GC in periods of balance sheet scarcity like Sep-2019 and Mar2020, and also in the run up to money market reform in 2016.

2y Treasury/OIS vs 3m trailing GC/OIS

Source: Bloomberg, Barclays Research. Estimated with data from 

Jan-2010 to Dec-2020 
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What do the models say? 30y swap spreads

17

• When we model changes in 30y Libor spreads, there isn’t one dominant driver: Treasury debt stock,Yield

curve steepness, S&P 500, and MBS duration all impact spreads.

• While the current Treasury debt stock registers at a touch belowstatistical significance, future issuance

expectations are likely at least in part driving the clear significance of the yield curve steepness variable.

• S&P 500 reflects market stress or stability, and is also a proxy forVA hedging activity. MBS duration is a

proxy for mortgage hedging flows.

• This model has an R^2 of 61% and finds that since YE-2019 30y spreads have widened by 16bps more

than expected. This 2020 residual and also the large 2015 residual both coincide with regulatory 

changes -SLR-exemption and Basel III introduction - suggesting the impact of regulatory change on 

spreads.

30y Libor spread vs 5s/30s Treasury curve

Source: Bloomberg, Barclays Research, Presenting member 

calculations. Estimated with data from Jan-2010 to Dec-2020 

Basel III

SLR
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LIBOR transition to SOFR

18 2/1/2021
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Despite transition to SOFR and OIS, Libor swaps still relevant

19

-40

-30

-20

-10

0

10

20

30

Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21

bp

2y swap sprd (bp) 2y SOFR sprd

• Floating rate moving from LIBOR (includes bank credit risk

component)  adjusted SOFR (secured, no credit risk) at a fixed

adjustment spread.

• Mid-2023: Libor-SOFR “frozen.” Changes in bank credit risk will no

longer directly translate into changes in swap rate, reducing

spread volatility.

• As transition date approaches, expect liquidity to migrate from

LIBOR swaps to SOFR and OIS swaps.

• In the 1y-2y maturity buckets, OIS swaps trade almost 2x the

duration of LIBOR. At the 10y maturity, 28x more duration trades in

LIBOR; 30y it’s 51x.

In March-2020, LIBOR spreads widened while SOFR spreads narrowed:

Source: Bloomberg, Barclays Research, SDR. Methodological note: Sizes displayed are 2x SDR, to reflect estimated 50% of trades that are unreported. 
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In conclusion...

20 2/1/2021
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What can we learn from each interest rate curve?

21

Swaps Treasuries

Supply No issuance constraints, any point on 

curve can grow or shrink.

Controlled by US Treasury, focus on 

regular and predictable issuance is 

important.

Financing Off balance sheet, no funding of longs 

or borrowing of shorts necessary. 

Implicit funding is LIBOR, OIS or 

SOFR rate.

Longs must be financed, shorts must 

be borrowed and are limited by repo 

availability. Repo markets can be 

opaque, especially for term repo.

Fungibility Swap cash flows of like tenor are 

perfectly fungible.

Distinct as a function of CUSIP, also 

distinctions like Coups vs. Ps of same 

maturity not fungible.

Technicals Smaller number of participants, 

especially in the long end can make 

swaps very technical. Lopsided flows 

can cause long term dislocations.

Idiosyncratic issues and on-the-run

vs. off-the-run, but curve sectors tend 

to be less technical.

Market Efficiency There are limits to the amount of 

capital that RV investors, banks etc. 

will commit to arbitrage away 

mispricings.

Most liquid risk-free market in all of 

global finance. RV opportunities exist,

but tend to be eventually arbitraged 

away.

Note: Fungibility only for cleared instruments

 

• Swaps provide a useful comparison point for the Treasury curve, but they also have their own

factors that influence swap spread dynamics.
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• Swap spreads can provide insight into Treasury relative value, but with caveats. Dislocations

can exist due to:

• Regulatory constraints and impact of regulatory change

• Funding imbalances, balance sheet scarcity, and cost of funding

• Duration needs of large investors or hedgers who can’t or choose not to use Treasuries

• Other factors that could be relevant from an issuance or macro-prudential standpoint

• The successful transition from LIBOR to SOFR and OIS swaps should reduce the credit related

volatility in swap spreads, making it easier to distill out other more nuanced factors.

• The fact that swap spreads are narrower at longer maturities could be interpreted as longer

maturity Treasuries being somewhat expensive to issue, but it could also suggest that there is

structural excess demand to receive longer maturity swaps.

• The lower level of swap spreads reflects regulation constraining arbitrage activity and a

reduced need to hedge mortgages with swaps.

• Spreads have moved higher since mid-year, despite the outlook for increasing Treasury

supply, implying that any supply effects have been outweighed by regulatory changes or

other developments.

Why should the US Treasury care about swap spreads?

22