Treasury Presentation to TBAC
Office of Debt Management

Fiscal Year 2024 Q1 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 Q1 FY2024

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

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

Latest Market Expectations for Treasury Financing in January 2024:

Highlights of Treasury’s February 2024 Quarterly Refunding Presentation

to the Treasury Borrowing Advisory Committee (TBAC)

Fiscal Year Primary Dealers, Median January 

2024 ($ billion)

OMB Budget, July 2023 

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

2024 2,467 2,718 2,240 

2025 1,975 1,907 1,821 

2026 1,979 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 Q1 FY2024 $1,108 $82 8% 15.9% 0.4%

Total Outlays thru Q1 FY2024 $1,618 $171 12% 23.2% 1.3%

Treasury OFP Near Term Fiscal 

Projections

Privately Held Net Marketable 

Borrowing ($ billion)

Assumed End-of-Quarter 

Cash Balance ($ billion)

Q2 FY2024 760 750 (Mar)

Q3 FY2024 202 750 (Jun)

*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 nominal coupon issuance identical in magnitude and distribution to the

increases implemented at the November refunding; dealers also expected continued increases in bill supply.

• Most dealers expected that coupon size increases from the February refunding would be the last needed in the near-term,

while uncertainty about the pace and duration of balance sheet normalization could be addressed via changes in bill

supply; several dealers suggested that additional coupon increases may be needed sometime in 2025 due to higher

deficits.

• With respect to TIPS, dealers broadly expected increases of $1 billion in the 10-year reopening with many dealers

expecting small increases in the new issue 5- and 30-year tenors in the coming quarter.

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 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 Dec-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 Q1 

FY24 ($ billion)

YoY change thru 

Q1 FY24 (%) Comments

Non-withheld and SECA taxes +$41 45%

IRS extended several major deadlines for some taxpayers, including those in California, from 

FY 2023 into FY 2024. 

Gross Corporate Taxes +$43 36%

IRS extended several major deadlines for some taxpayers, including those in California, from 

FY 2023 into FY 2024.

Withheld & FICA taxes 

(calendar adjusted) -$4 0%

Due to wage and employment growth, offset by the absence of the CARES deferral 

repayment. 
7

50

100

150

200

250

300

350

400

450 $ bn

Largest Outlays

Oct - Dec FY2023 Oct - Dec FY2024

Outlays in the chart above are on a calendar adjusted basis

Notable Outlay Category

YoY change thru 

Q1 FY24 ($ billion)

YoY change thru 

Q1 FY24 (%) Comments

Social Security Administration 

(calendar adjusted) +$39 +12%

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

number of beneficiaries.

Health and Human Services 

(calendar adjusted) +$17 +4% Due to increases in Medicare spending.

Department of Defense 

(calendar adjusted) +$22 +11%

Due to increased spending for military personnel, operations, maintenance 

and procurement.

Department of Treasury +$54 +20%

Primarily due to a $78 billion (37%) increase in gross interest on public debt. 

Offset by lower Employee Retention Tax Credits (-$20 billion). 

Department of Veterans Affairs 

(calendar adjusted) +$12 +18% Due to benefit increases.

Department of Education -$13 -24% Due to several upward modifications that increased outlays last year.

Department of Agriculture -$12 -16%

Due to the end of the emergency allotments for the Supplemental Nutrition 

Assistance Program there were discontinued in March 2023. 

Other (not in the chart above) +$58 +236%

Including $62 billion increase in Federal Deposit Insurance Corporation 

outlays used primarily to repay liabilities incurred in March and April 2023. 
8

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800 October November December January February March April May June July August September $ bn

Cumulative Budget Deficits by Fiscal Year

FY2022 FY2023 FY2024
Section III:

Various Fiscal Forecasts

Primary Dealers, OMB, CBO
10

Recent Economic Forecasts 

Note: OMB’s Economic assumptions for July 2023 were established in June 2023.

CBO’s economic assumptions (of GDP, Inflation and Unemployment) were published in July 2023, while CBO deficit forecasts were from 

the June 2023 CBO budget updates. Budget and Economic Data | Congressional Budget Office (cbo.gov)

Primary Dealer Median Estimates January 2024

CY2024 CY2025 CY2026

 % Change from Q4 to Q4

GDP

 Real 1.2 1.9 2.0

 Nominal 3.4 4.2 4.2

Inflation

 CPI Headline 2.5 2.3 2.2

 CPI Core 2.8 2.4 2.3

 Fourth Quarter Levels 

Unemployment Rate (%) 4.3 4.3 4.2

FY2024 FY2025 FY2026

Deficits ($bil) $1,778 $1,819 $1,800

CBO Estimates July 2023

CY2024 CY2025 CY2026

 % Change from Q4 to Q4

GDP

 Real 1.5 2.4 na

 Nominal 3.9 4.5 na

Inflation

 CPI Headline 2.7 2.2 na

 Fourth Quarter Levels 

Unemployment Rate (%) 4.7 4.5 na

FY2024 FY2025 FY2026

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

OMB Estimates July 2023

CY2024 CY2025 CY2026

 % Change from Q4 to Q4

GDP

 Real 1.8 2.4 2.0

 Nominal 4.1 4.5 4.1

Inflation

 CPI Headline 3.3 2.5 2.3

 Fourth Quarter Levels 

Unemployment Rate (%) 4.3 4.1 4.1

FY2024 FY2025 FY2026

Deficits ($bil) $1,894 $1,710 $1,567
Recent Deficit Forecasts 

11

• Primary dealers slightly decreased their deficit estimates in January 2024 relative to estimates they 

provided in October 2023.

• Dealers generally suggested that risks for higher deficits were asymmetric to the upside, noting the 

potential for lagged effects on economic growth given the Fed’s efforts to tighten financial conditions 

over the last 21 months, the path of future monetary policy (including balance sheet normalization), 

and fiscal policy post the November elections.

• 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. Adjusted to reflect 

the latest assumptions about student loans.

• 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 1,700 1,778 1,854 -22 1,894 1,501

FY2025 1,760 1,819 1,906 -31 1,710 1,649

FY2026 1,755 1,800 1,925 0 1,567 1,586

As of date Jan-24 Jan-24 Jan-24 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

Feb

2024

$ 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 Feb 2024

$ 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

2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 1 0-Year Treasury Note Rate, %

Interest Rate Assumptions: 10-Year Treasury Note

Implied Forward Rates as of 01/26/2024 CBO Budget (Feb 2023)

OMB MSR (Jul 2023) CBO Econ Assumptions (Jul 2023)

1 0-Year Treasury Rate of 4.15% as of 01/26/2024
Section IV:

Estimated Borrowing Needs and 

Financing Implications
15

Assumptions for Financing Section (pages 16 to 20)

• Portfolio and SOMA holdings as of 12/31/2023, 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 January 2024, while using total bills 

outstanding of ~$5.7 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 12/31/2023, 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 privately-held net 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 FY24 (projection-OFP)
17

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

** Assumes end-of-March 2024 and end-of-June 2024 and cash balances of $750 billion and $750 billion respectively versus end-of-December 2023 cash balance of $769

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 the Current and Next Quarters Based on 

Recent Borrowing Estimates

Assuming Constant 

Coupon Issuance Sizes*

Treasury Announced Net 

Marketable Borrowing**

760

Net Coupon Issuance 318

Implied Change in Bills 442

Security Gross Maturing Net Gross Maturing Net

2-Year FRN 54 70 (16) 132 146 (14)

2-Year 177 162 15 330 336 (6)

3-Year 156 159 (3) 300 291 9

5-Year 180 79 101 336 152 184

7-Year 122 72 50 236 145 91

10-Year 114 47 67 226 102 124

20-Year 42 0 42 84 0 84

30-Year 66 0 66 131 0 131

5-Year TIPS 0 0 0 42 0 42

10-Year TIPS 34 47 (13) 49 47 2

30-Year TIPS 9 0 9 9 0 9

Coupon Subtotal 954 636 318 1,875 1,218 657

Coupon Issuance Coupon Issuance

Sources of Privately-Held Financing in FY24 Q2

January - March 2024

January - March 2024 Fiscal Year-to-Date

Assuming Constant 

Coupon Issuance Sizes*

Treasury Announced Net 

Marketable Borrowing**

202

Net Coupon Issuance 447

Implied Change in Bills (245)

Security Gross Maturing Net Gross Maturing Net

2-Year FRN 106 68 38 238 214 24

2-Year 180 145 35 510 481 29

3-Year 156 140 16 456 431 25

5-Year 183 35 148 519 187 332

7-Year 123 107 16 359 252 107

10-Year 114 59 55 340 160 180

20-Year 42 0 42 126 0 126

30-Year 66 0 66 197 0 197

5-Year TIPS 42 26 16 84 26 58

10-Year TIPS 16 0 16 65 47 18

30-Year TIPS 0 0 0 9 0 9

Coupon Subtotal 1,028 581 447 2,903 1,799 1,104

Sources of Privately-Held Financing in FY24 Q3

April - June 2024

April - June 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 $750 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 1,700 1,778 1,854 1,894 1,501

FY 2025 Deficit 1,760 1,819 1,906 1,710 1,649

FY 2026 Deficit 1,755 1,800 1,925 1,567 1,586

FY 2024 SOMA Redemption 520 596 696

FY 2025 SOMA Redemption 0 7 5 196

FY 2026 SOMA Redemption 0 0 0

FY 2024 Privately-Held Net Marketable Borrowing* 2,327 2,467 2,555 2,718 2,240

FY 2025 Privately-Held Net Marketable Borrowing* 1,850 1,975 2,150 1,907 1,821

FY 2026 Privately-Held Net Marketable Borrowing* 1,800 1,979 2,045 1,696 1,676

Estimates as of: Jan-24 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

1,000

1,500

2,000

2,500

3,000

Nov

2021

Feb

2022

May

2022

Aug

2022

Nov

2022

Feb

2023

May

2023

Aug

2023

Nov

2023

Feb

2024

$ bn

TBAC date

FY 2024

PD FY24 OMB FY24 CBO FY24

500

1,000

1,500

2,000

2,500

Nov 2022 Feb 2023 May 2023 Aug 2023 Nov 2023 Feb 2024

$ 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 2024 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 01/31/2024*

*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 $750 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, Jan 2024

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

January 2024 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 $5.8 trillion as of

1/31/2024 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 21.8% as of 1/31/2024

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 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 2022 2023 2024 2025 2026 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)

01/31/24

70.9 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 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 2022 2023 Months

Calendar Year

 Private (ex SOMA) Total Consolidated
25

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 2022 2023 2024 2025 2026

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%

01/31/24 

21.8%

Max 10.7%

01/31/24 

7.4%

01/31/24 2%

Max 2.7%
26

20%

30%

40%

50%

60%

70%

80% 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 2022 2023 2024 2025 2026

Calendar Year

Treasury Maturity Profile

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

Bills Constant Coupons Constant Prorated Bills and Coupons

01/31/24 

53.9%

01/31/24 

33.6%
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 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 Dec-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 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 Dec-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 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 Dec-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 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 Dec-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 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 Dec-23 Bid-to-Cover Ratio

Bid-t o-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%

50% 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 Dec-23 1 3-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% 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 Dec-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% 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 Dec-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% 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 Dec-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% 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 Dec-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% 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 Dec-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% 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 Dec-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

2 0

4 0

6 0

8 0

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 Oct-23 Nov-23 Dec-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 November 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 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 $ bn

Bills

Outstanding Foreign Holdings Foreign % (RHS)

11/30/23 

5,671

11/30/23 

19%

11/30/23 

1,065

10%

20%

30%

40%

50%

60%

70%

0

4,000

8,000

12,000

16,000

20,000

24,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 $ bn

Nominal Coupons, TIPS, and FRNs

Outstanding Foreign Holdings Foreign % (RHS)

11/30/23 

20,595

11/30/23 

33%

11/30/23 

6,744
VII. Appendix

42

Contents

A. Quarterly Tax Receipts Chart p. 43

B. Treasury Non-Marketable Borrowing p. 44

C. Budget Surplus and Deficits p. 45

D. Sources of Financing: Reconciliation of last quarter p. 46

E. Privately-Held Net Marketable Borrowing Definition and Calculation Example p. 47

F. Detailed Reconciliation of Various Borrowing Estimates p. 48

G. Various Historical Debt Service Cost Metrics p. 49

H. Various Historical Treasury Interest Rate Metrics p. 50

I. Projected Privately-Held Net Marketable Borrowing Table p. 51

J. Auction Statistics Tables p. 52-54
 (100%)

 (80%)

 (60%)

 (40%)

 (20%)

0%

20%

40%

60%

80%

100% 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 Dec-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

(30)

(20)

(10)

0

10

20

30 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 Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Q3-22 Q4-22 Q1-23 Q2-23 Q3-23 Q4-23 Q1-24 $ 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 (Jan 24) 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. Adjusted to

reflect the latest assumptions about student loans.

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 437 Security Gross Maturing Net Gross Maturing Net

Net Coupon Issuance 338 4-Week 1,150 1,150 0 1,150 1,150 0

Subtotal: Net Marketable Borrowing 776 8-Week 1,065 955 110 1,065 955 110

13-Week 969 875 94 969 875 94

Ending Cash Balance 769 17-Week 722 606 116 722 606 116

Beginning Cash Balance 657 26-Week 878 681 197 878 681 197

Subtotal: Change in Cash Balance 112 52-Week 176 136 40 176 136 40

CMBs

Net Implied Funding for FY24 Q1* 664 6-Week 935 870 65 935 870 65

CMBs 0 185 (185) 0 185 (185)

Bill Subtotal 5,895 5,458 437 5,895 5,458 437

Security Gross Maturing Net Gross Maturing Net

2-Year FRN 78 76 2 78 76 2

2-Year 153 174 (21) 153 174 (21)

3-Year 144 131 13 144 131 13

5-Year 156 73 83 156 73 83

7-Year 114 73 41 114 73 41

10-Year 112 55 57 112 55 57

20-Year 42 0 42 42 0 42

30-Year 65 0 65 65 0 65

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 921 582 338 921 582 338

Total 6,816 6,040 776 6,816 6,040 776

Sources of Privately-Held Financing in FY24 Q1

October - December 2023 Fiscal Year-to-Date

Coupon Issuance Coupon Issuance

October - December 2023 October - December 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 $750 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 1,700 1,778 1,854 1,894 1,501

FY 2025 Deficit 1,760 1,819 1,906 1,710 1,649

FY 2026 Deficit 1,755 1,800 1,925 1,567 1,586

FY 2024 Change in Cash Balance 9 3 9 3 9 3 0 0

FY 2025 Change in Cash Balance 0 0 0 0 0

FY 2026 Change in Cash Balance 0 0 0 0 0

FY 2024 Total Net Marketable Borrowing 2,029 1,551

FY 2025 Total Net Marketable Borrowing 1,832 1,746

FY 2026 Total Net Marketable Borrowing 1,696 1,676

FY 2024 SOMA Redemption 520 596 696

FY 2025 SOMA Redemption 0 7 5 196

FY 2026 SOMA Redemption 0 0 0

FY 2024 Privately-Held Net Marketable Borrowing* 2,327 2,467 2,555 2,718 2,240

FY 2025 Privately-Held Net Marketable Borrowing* 1,850 1,975 2,150 1,907 1,821

FY 2026 Privately-Held Net Marketable Borrowing* 1,800 1,979 2,045 1,696 1,676

Estimates as of: Jul-23 Jun-23

Primary Dealer

OMB CBO

Jan-24
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 

12/31/2023 9/30/2023 6/30/2023

-1

0

1

2

3

4

0 10 20 30

Percent

Years to Maturity

Treasury Real Yield Curve 

as of specified dates 

12/31/2023 9/30/2023 6/30/2023

-100

-80

-60

-40

-20

0

20

2Y 5Y 10Y 30Y

Bps

Since

Nominal Yield Changes in Selected Tenors 

Through the end of 12/31/23

6/30/2023 9/30/2023

-20

-10

0

10

20

Jun-23 Sep-23 Dec-23

Bps

Bills-SOFR OIS spreads 

Through the end of 12/31/23

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

-80

-60

-40

-20

0

20

40

5Y 10Y 30Y

Bps

Since

Real Yield Changes in Selected Tenors 

Through the end of 12/31/23

6/30/2023 9/30/2023

2

2.5

3

Jun-23 Sep-23 Dec-23

Bps

Breakevens

Through the end of 12/31/23

5Y 10Y 30Y
51

Projected Privately-Held Net Marketable Borrowing 

Assuming Private Coupon Issuance & Total Bills Outstanding 

Remain Constant as of 01/31/2024*

*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 548 568 857 84 36 2,093 

2025 0 520 883 20 44 1,468 

2026 0 213 880 38 2 1,133 

2027 0 188 763 21 0 972 

2028 0 195 444 (1) 0 638 

2029 0 30 567 1 0 597 

2030 0 0 691 15 0 706 

2031 0 0 453 3 0 457 

2032 0 0 471 (21) 0 450 

2033 0 0 483 (14) 0 469 
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 10/10/2023 5.310 2.95 85.0 33.2 2.7 64.1 5.0 0.7 0.8

4-Week 10/17/2023 5.325 2.79 88.4 27.2 2.4 70.4 6.6 0.7 0.9

4-Week 10/24/2023 5.305 2.98 88.2 28.4 4.7 66.9 6.8 0.7 0.9

4-Week 10/31/2023 5.295 2.94 89.8 26.7 3.8 69.6 5.2 0.6 0.9

4-Week 11/7/2023 5.290 2.91 89.9 31.6 3.1 65.3 5.1 0.7 0.9

4-Week 11/14/2023 5.290 2.57 89.8 47.6 4.4 48.0 5.2 0.7 0.9

4-Week 11/21/2023 5.290 2.75 90.1 32.5 4.2 63.3 4.9 0.7 0.9

4-Week 11/28/2023 5.300 2.58 80.2 41.2 4.0 54.8 4.8 0.7 0.8

4-Week 12/5/2023 5.290 2.75 74.9 39.5 6.1 54.4 5.1 0.4 0.8

4-Week 12/12/2023 5.285 3.08 75.0 36.0 4.6 59.5 5.0 0.4 0.8

4-Week 12/19/2023 5.270 2.86 75.2 31.2 5.3 63.5 4.8 0.4 0.8

4-Week 12/26/2023 5.265 2.68 75.1 36.2 7.8 56.0 4.9 0.4 0.8

4-Week 1/2/2024 5.325 2.35 75.4 58.2 3.6 38.3 4.6 0.4 0.8

8-Week 10/10/2023 5.355 2.46 76.3 43.9 5.8 50.3 3.7 0.6 1.5

8-Week 10/17/2023 5.345 2.88 83.0 32.9 2.9 64.2 2.0 0.6 1.6

8-Week 10/24/2023 5.325 2.63 82.5 36.1 4.0 59.9 2.5 0.6 1.6

8-Week 10/31/2023 5.330 2.52 83.5 40.5 3.7 55.8 1.5 0.6 1.6

8-Week 11/7/2023 5.300 2.70 83.6 34.6 5.2 60.2 1.4 0.6 1.6

8-Week 11/14/2023 5.285 2.70 82.1 41.0 3.5 55.5 2.9 0.6 1.6

8-Week 11/21/2023 5.280 2.63 83.7 41.1 4.0 54.9 1.3 0.6 1.6

8-Week 11/28/2023 5.280 2.73 78.9 34.4 4.9 60.6 1.1 0.7 1.5

8-Week 12/5/2023 5.280 2.75 78.6 39.2 3.2 57.5 1.4 0.4 1.5

8-Week 12/12/2023 5.275 2.82 78.6 40.2 3.4 56.5 1.4 0.4 1.5

8-Week 12/19/2023 5.275 2.83 78.5 46.0 2.8 51.2 1.5 0.4 1.5

8-Week 12/26/2023 5.270 2.74 78.5 41.1 1.2 57.7 1.5 0.4 1.5

8-Week 1/2/2024 5.285 2.59 78.6 33.8 1.7 64.5 1.4 0.4 1.5

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 10/5/2023 5.345 2.77 68.0 40.6 4.8 54.7 3.0 5.2 2.3

13-Week 10/12/2023 5.340 2.79 70.0 32.5 4.9 62.6 3.0 4.5 2.3

13-Week 10/19/2023 5.340 3.16 72.5 27.7 4.2 68.1 2.5 4.8 2.4

13-Week 10/26/2023 5.310 2.85 70.5 29.3 6.4 64.3 4.5 4.6 2.4

13-Week 11/2/2023 5.325 2.78 72.8 33.7 5.1 61.2 2.2 8.2 2.5

13-Week 11/9/2023 5.285 2.91 72.5 32.1 6.1 61.8 2.5 6.2 2.5

13-Week 11/16/2023 5.285 2.76 72.8 33.8 4.0 62.1 2.2 7.2 2.5

13-Week 11/24/2023 5.270 2.90 72.8 33.1 4.7 62.2 2.2 5.9 2.4

13-Week 11/30/2023 5.280 2.87 73.2 40.3 3.9 55.8 1.8 5.6 2.5

13-Week 12/7/2023 5.250 2.98 72.8 32.4 5.3 62.3 2.2 1.4 2.3

13-Week 12/14/2023 5.260 2.99 72.7 37.6 6.9 55.5 2.3 1.5 2.3

13-Week 12/21/2023 5.260 2.89 72.7 42.7 2.9 54.4 2.3 0.6 2.3

13-Week 12/28/2023 5.260 3.07 72.7 33.0 3.7 63.3 2.3 2.6 2.4

17-Week 10/10/2023 5.350 2.96 53.3 41.6 3.4 55.0 0.7 0.4 2.2

17-Week 10/17/2023 5.355 3.37 55.3 35.8 2.7 61.5 0.7 0.4 2.2

17-Week 10/24/2023 5.355 3.27 55.2 27.8 4.4 67.8 0.8 0.4 2.2

17-Week 10/31/2023 5.335 2.96 53.5 40.0 3.5 56.5 2.5 0.4 2.2

17-Week 11/7/2023 5.340 2.89 55.4 36.5 5.8 57.7 0.7 0.4 2.2

17-Week 11/14/2023 5.285 3.06 54.6 40.3 3.0 56.7 1.4 0.4 2.2

17-Week 11/21/2023 5.255 3.17 55.3 42.2 2.7 55.1 0.7 0.4 2.3

17-Week 11/28/2023 5.260 3.08 55.3 35.0 2.3 62.7 0.7 0.5 2.3

17-Week 12/5/2023 5.240 2.92 55.3 47.3 4.7 48.0 0.7 0.3 2.2

17-Week 12/12/2023 5.240 2.97 55.4 47.5 3.3 49.3 0.6 0.3 2.2

17-Week 12/19/2023 5.250 2.84 55.3 49.9 4.2 45.9 0.7 0.3 2.2

17-Week 12/26/2023 5.220 2.99 55.2 41.9 3.5 54.6 0.8 0.3 2.2

17-Week 1/2/2024 5.210 3.15 55.5 39.9 3.8 56.3 0.5 0.3 2.2

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 10/5/2023 5.340 2.88 61.6 30.3 2.8 66.9 2.4 4.7 4.2

26-Week 10/12/2023 5.320 2.79 63.3 35.7 5.1 59.2 2.7 4.1 4.2

26-Week 10/19/2023 5.335 2.91 65.8 32.7 2.8 64.5 2.2 4.4 4.4

26-Week 10/26/2023 5.325 2.70 65.6 40.3 8.6 51.1 2.4 4.2 4.4

26-Week 11/2/2023 5.320 2.90 66.0 34.8 7.2 58.0 2.0 7.4 4.6

26-Week 11/9/2023 5.260 2.92 65.5 33.5 7.7 58.8 2.5 5.6 4.5

26-Week 11/16/2023 5.270 2.75 65.7 38.6 3.7 57.7 2.3 6.6 4.6

26-Week 11/24/2023 5.230 2.55 65.9 49.1 5.5 45.4 2.1 5.3 4.5

26-Week 11/30/2023 5.240 3.01 66.4 37.1 3.8 59.1 1.6 5.1 4.5

26-Week 12/7/2023 5.190 2.66 65.8 46.2 10.2 43.6 2.2 1.3 4.2

26-Week 12/14/2023 5.190 3.03 65.8 46.1 4.5 49.5 2.2 1.4 4.2

26-Week 12/21/2023 5.130 3.10 65.5 30.7 2.7 66.6 2.5 0.5 4.2

26-Week 12/28/2023 5.080 3.23 65.7 27.9 0.5 71.6 2.3 2.3 4.3

52-Week 10/5/2023 5.185 3.21 42.2 23.5 0.1 76.4 1.8 3.2 5.7

52-Week 11/2/2023 5.135 2.89 42.5 33.9 1.8 64.3 1.5 4.8 6.0

52-Week 11/30/2023 4.935 3.56 42.3 27.3 0.2 72.5 1.7 3.3 5.8

52-Week 12/28/2023 4.595 3.27 42.6 21.0 1.4 77.6 1.4 1.5 5.6

6-Week CMB 10/5/2023 5.330 2.46 64.8 62.6 7.5 29.9 0.2 0.0 0.9

6-Week CMB 10/12/2023 5.360 2.74 69.8 36.0 2.3 61.7 0.2 0.0 1.0

6-Week CMB 10/19/2023 5.325 3.12 74.8 31.7 3.0 65.3 0.2 0.0 1.1

6-Week CMB 10/26/2023 5.300 3.01 74.8 31.7 3.0 65.3 0.2 0.0 1.1

6-Week CMB 11/2/2023 5.295 2.81 74.8 33.8 2.4 63.8 0.2 0.0 1.1

6-Week CMB 11/9/2023 5.290 2.84 74.8 33.6 3.0 63.4 0.2 0.0 1.1

6-Week CMB 11/16/2023 5.290 2.64 74.8 37.2 3.7 59.1 0.2 0.0 1.1

6-Week CMB 11/24/2023 5.285 2.96 74.8 41.3 4.5 54.2 0.2 0.0 1.0

6-Week CMB 11/30/2023 5.285 2.92 69.8 41.9 4.5 53.6 0.2 0.0 1.0

6-Week CMB 12/7/2023 5.285 3.04 69.7 41.8 4.7 53.5 0.3 0.0 1.0

6-Week CMB 12/14/2023 5.285 2.85 69.8 43.8 3.9 52.3 0.2 0.0 1.0

6-Week CMB 12/21/2023 5.270 3.02 69.8 43.2 4.4 52.5 0.2 0.0 1.0

6-Week CMB 12/28/2023 5.280 2.85 69.8 37.4 6.1 56.5 0.2 0.0 1.0

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)**

5-Year TIPS 10/31/2023 2.440 2.36 21.9 9.2 17.6 73.2 0.1 0.0 12.7

5-Year TIPS 12/29/2023 1.710 2.55 20.0 6.1 18.2 75.7 0.0 0.0 11.2

10-Year TIPS 11/30/2023 2.180 2.32 14.9 13.6 16.2 70.2 0.1 0.2 16.8

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 10/31/2023 5.055 2.64 50.3 17.6 20.3 62.0 0.7 0.0 12.0

2-Year 11/30/2023 4.887 2.54 53.3 18.8 23.9 57.4 0.7 0.6 12.9

2-Year 1/2/2024 4.314 2.68 56.3 18.6 19.5 61.9 0.7 0.0 13.5

3-Year 10/16/2023 4.740 2.56 45.8 22.1 21.9 56.0 0.2 0.0 15.9

3-Year 11/15/2023 4.701 2.67 47.5 16.3 19.1 64.6 0.5 0.9 17.0

3-Year 12/15/2023 4.490 2.42 49.6 26.2 21.7 52.1 0.4 0.0 17.5

5-Year 10/31/2023 4.899 2.36 51.8 19.4 19.1 61.5 0.2 0.0 28.6

5-Year 11/30/2023 4.420 2.46 54.8 16.8 17.6 65.5 0.2 0.6 31.0

5-Year 1/2/2024 3.801 2.50 57.8 14.0 15.4 70.6 0.2 0.0 32.7

7-Year 10/31/2023 4.908 2.70 37.7 11.0 18.4 70.6 0.3 0.0 28.0

7-Year 11/30/2023 4.399 2.44 38.6 20.3 15.8 63.9 0.4 0.4 29.5

7-Year 1/2/2024 3.859 2.50 39.7 16.9 19.4 63.7 0.3 0.0 30.5

10-Year 10/16/2023 4.610 2.50 34.9 18.7 20.9 60.3 0.1 0.0 34.9

10-Year 11/15/2023 4.519 2.45 39.7 15.1 15.2 69.7 0.3 0.8 40.7

10-Year 12/15/2023 4.296 2.53 36.9 17.3 18.9 63.8 0.1 0.0 37.1

20-Year 10/31/2023 5.245 2.59 12.9 11.9 15.2 72.9 0.1 0.0 20.5

20-Year 11/30/2023 4.780 2.58 15.8 9.5 16.5 74.0 0.2 0.2 25.8

20-Year 1/2/2024 4.213 2.55 12.9 12.9 20.7 66.4 0.1 0.0 21.1

30-Year 10/16/2023 4.837 2.35 20.0 18.2 16.7 65.1 0.0 0.0 40.5

30-Year 11/15/2023 4.769 2.24 23.9 24.7 15.2 60.1 0.1 0.5 49.1

30-Year 12/15/2023 4.344 2.43 20.9 14.2 17.3 68.5 0.1 0.0 44.1

2-Year FRN 10/31/2023 0.170 3.23 26.0 28.2 0.1 71.7 0.0 0.0 0.1

2-Year FRN 11/24/2023 0.200 2.84 26.0 34.3 0.6 65.1 0.0 0.0 0.0

2-Year FRN 12/29/2023 0.250 2.93 26.0 37.0 0.5 62.5 0.0 0.0 0.0

Nominal Coupons & FRNs
Discussion of Treasury Futures Positions 

Across Different Investor Types

Treasury Borrowing Advisory Committee

January 30th, 2024

1

“According to Treasury futures positioning data, asset manager long positions and leveraged fund

short positions have increased significantly. Please discuss the factors that could be driving this

dynamic. What are the reasons for asset managers to prefer the Treasury futures market over the

cash market for their duration needs? What type of activity does the leveraged short positioning

reflect; for example, to what extent could this be cash-futures basis trading activity? What are

important factors to consider when monitoring changes in cash-futures basis positions?"
Summary

➢ In this presentation, we examine the large increases in asset manager longs and

leveraged fund shorts in Treasury futures and propose potential structural factors that

may be contributing to the persistent increases over time.

➢ We discuss specific reasons why asset managers use Treasury futures and find that

their strategic asset allocation has resulted in lower Treasury allocations and a potential

structural need for Treasury futures.

➢ We also discuss how leveraged funds use Treasury futures, and what types of levered

strategies might result in consistently opposing positions relative to asset managers.

➢ We conclude that relative-value trading strategies are the most likely driver of structural

leveraged fund shorts in Treasury futures and propose some relevant relationships for

Treasury to monitor on the Treasury futures basis trade.

➢ We suggest that a mutually beneficial relationship exists between asset managers and

leveraged fund positioning in Treasury futures.

➢ We conclude with a brief discussion of potential interactions between asset-managers

and leveraged fund positioning and possible areas of future research.

2
3

Review of CFTC Futures Data
Overview of CFTC Positioning Data

➢ The CFTC Traders in Financial Futures (TFF) report separates large traders in the

financial markets into four categories(1):

4

(1) Information sourced from CFTC Traders in Financial Futures (TFF) Explanatory Notes

Dealer / Intermediary

“Includes large banks (U.S. and non-U.S.) and dealers in 

securities, swaps and other derivatives.”

Asset Manager / Institutional

“Institutional investors, including pension funds, 

endowments, insurance companies, mutual funds and 

those portfolio/investment managers whose clients are 

predominantly institutional. “

Leveraged Funds

“Typically hedge funds and various types of money 

managers, including registered commodity trading 

advisors (CTAs); registered commodity pool operators 

(CPOs) or unregistered funds identified by CFTC.3”

Other Reportables

“Includes corporate treasuries, central banks, smaller 

banks, mortgage originators, credit unions and any other 

reportable traders not assigned to the other three 

categories.“ 

CFTC Traders in Financial Futures (TFF) Categories
Overview of CFTC Positioning Data

➢ Investor category data is available since 2006.

➢ We first show in Figure 1 total futures open interest(1) vs. the size of the Treasury market.(2)

➢ For Treasuries, we use total coupons outstanding excluding SOMA holdings.

➢ Open interest has grown with the overall size of the Treasury market.

➢ As a percentage of the market (Figure 2), open interest has been stable after a large decline

during the global financial crisis. Recently we’ve seen re-leveraging and wider range.

(1) Data on Treasury futures is sourced from the CFTC Traders in Financial Futures report as of Dec 2023 5

(2) Data on Treasury securities is sourced from US Treasury and NY Fed as of Dec 2023

Futures Open Interest (Left 

Axis, $Tr)

Treasury Coupons 

Outstanding ex. SOMA 

(Right Axis, $Tr)

0

4

8

12

16

20

0.0

0.5

1.0

1.5

2.0

2.5

06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Figure 1: Treasury Futures Open Interest (Face Amount) vs. 

Treasury Coupons Outstanding (ex. SOMA)

0%

5%

10%

15%

20%

25%

30%

35%

06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Figure 2: Treasury Futures Open Interest (Face Amount)

% of Treasury Coupons Outstanding (ex. SOMA)

Reduced Leverage / 

Contained Range Post GFC

Wider Range, Some 

Releveraging 2018 Onwards
Overview of CFTC Positioning Data

➢ Recently there have been large increases in both asset manager and leveraged fund positions in

Treasury futures.

➢ Since November 2021, asset managers (AM) have increased their net position from $100bn to over

$700bn, while leveraged funds (LF) have moved from flat to short almost $800bn.(1)

➢ When normalized by the size of the Treasury market(2) in Figure 4, recent trends look similar. One

interesting thing to note is the size of AM and LF positions is similar to 2019 peak (not larger).

➢ In the 2006-2007 period, AM and LF relative positions were flipped. This change could indicate a

structural evolution in the ecosystem and how different investors behave.

6

Leveraged 

Funds

Asset 

Managers

Dealer

Other

-1,000

-800

-600

-400

-200

0

200

400

600

800

1,000

06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Figure 3: Net Treasury Futures By Investor Type

($Bn Face)

Leveraged 

Funds

Asset 

Managers

Dealer

Other

-6%

-4%

-2%

0%

2%

4%

6%

06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Figure 4: Net Treasury Futures by Investor Type

(% Treasury Coupons ex. SOMA)

(1) Data on Treasury futures is sourced from the CFTC Traders in Financial Futures report as of Dec 2023
Overview of CFTC Positioning Data

➢ Most of the net position in futures is concentrated in shorter duration contracts (TU, FV, and

TY) likely due to larger amounts of Treasuries outstanding in these maturity buckets.

➢ Currently, these three contracts represent 80% of the net asset manager notional position and

55% of the net TY equivalent position.

➢ For purposes of the analysis we have focused on notional exposure, as opposed to DV01

exposure, because it is most consistent with quantities of repo/funding needs.

• That said, there are likely important things to consider around DV01 exposure, since it would more

accurately reflect interest rate risk concentration in longer duration securities.

7

(1) Data on Treasury futures is sourced from the CFTC Traders in Financial Futures report as of Dec 2023

Leveraged 

Funds

Asset 

Managers

-400

-300

-200

-100

0

100

200

300

400

06 08 10 12 14 16 18 20 22

Figure 5: Net TU Position 

($Bn Face)

Leveraged 

Funds

Asset 

Managers

-400

-300

-200

-100

0

100

200

300

400

06 08 10 12 14 16 18 20 22

Figure 6: Net FV Position 

($Bn Face)

Leveraged 

Funds

Asset 

Managers

-400

-300

-200

-100

0

100

200

300

400

06 08 10 12 14 16 18 20 22

Figure 7: Net TY Position 

($Bn Face)
Overview of CFTC Positioning Data

➢ We also show data for US and WN contracts (note the axis change) as well as all contracts in

TY equivalent terms as of the end of 2023.

➢ While the contours are not all the same, the broad trends recently (expansion of AM longs and

LF shorts) are consistent across all Treasury futures contracts.

8

(1) Data on Treasury futures is sourced from the CFTC Traders in Financial Futures report as of Dec 2023

Leveraged 

Funds

Asset 

Managers

-80

-60

-40

-20

0

20

40

60

80

06 08 10 12 14 16 18 20 22

Figure 8: Net US Position 

($Bn Face)

Leveraged 

Funds

Asset 

Managers

-80

-60

-40

-20

0

20

40

60

80

06 08 10 12 14 16 18 20 22

Figure 9: Net WN Position 

($Bn Face)

TU

TU

FV

FV

TY

TY

UXY

UXY

US

US

WN WN

0

100

200

300

400

500

600

700

800

Face ($Bn) TY Equiv Face ($Bn)

Figure 10: Asset Manager 

Current Face Amount & TY 

Equivalent Breakdown

79%

55%
9

Asset Manager Discussion
How do Asset Managers Use Futures?

➢ Active asset managers likely use Treasury futures for the following reasons:

1. Expressing directional views on duration and yield curve.

2. Hedging and managing interest rate risk across different sectors & curve points.

3. Obtaining financing / leverage to implement active views vs. benchmark.

➢ Why might asset managers use Treasury futures instead of Treasuries?

1. Could simplify execution and operations (negates need for cash / repo trades).

2. Eliminates reporting repo interest expense.

3. Guidelines might not allow repo leverage (mostly separate accounts).

4. Likely more leverage flexibility compared to 40-Act repo limits.

10
How do Asset Managers Use Futures?

➢ The CFTC data shows that in recent years, asset managers have had a net long bias in Treasury futures,

even with large swings in Treasury yields (10y yield of 0.5% in ‘21 to 5.0% in ’23). Why would this be?

➢ First, what types of positions might cause asset managers to be net long Treasury futures?

1. Active rate views (either long duration or curve steepener)

• Based on an empirical analysis of 20 large mutual funds, asset managers appeared to trade short duration

after the large drop in yields during the COVID pandemic. During this period, there was a large drop in the

asset manager net futures long position, but it remained net long.

• The empirical results(1) in Figure 12 show that asset managers have since moved closer to neutral, and yet the

net futures positions now stand at an all-time high.

2. Financing certain active and/or non-index portfolio allocations

• We view this as the most likely explanation for why asset managers might have a structural position in

futures and will expand on that view in the coming slides

11

Asset Managers Net 

Futures ($bn Face, 

Left Axis)

10Y Yield 

(Right Axis) 0.0

1.0

2.0

3.0

4.0

5.0

6.0

-400

-200

0

200

400

600

800

1,000

06 08 10 12 14 16 18 20 22 24

Figure 11: Asset Manager Net Futures 

vs. 10Y Yield 

Average of 20 

Large Active Core 

Plus Managers

Index 

Fund

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

17 18 19 20 21 22 23

Figure 12: Asset Manager Empirical 

Duration Using Three Factor 

Regression(1)

Average “Active” 

Duration

(1) Sourced from Bloomberg and the presenter’s firm’s calculations. Fund returns are regressed on US 10Y, DXY, and IG Corporate OAS. Data as of 01/17/2024
Asset Managers: Product Mix Tends to Favor Futures 

Relative to Treasury Repo

➢ Below, we show in Table 1 a broad overview of different asset management products

with associated regulatory requirements for repo and futures usage.

➢ We focus on active fixed-income, since passive strategies, which largely track cash

indices, are probably less likely to use Treasury futures.

➢ Based on industry estimates(1), we conclude that most of CFTC asset manager data

represents mutual funds and actively-managed separate accounts.

12

Product Type Governance Guidelines Allow Economic 

Leverage?

Allow 

Repo?

Allow 

Futures?

Active Mutual Fund SEC / 1940 Act Prospectus/SAI Yes Yes(2), 50% Yes

Active ETF SEC / 1940 Act Prospectus/SAI Yes Yes(2), 50% Yes

Collective Trust ERISA Prospectus/SAI Yes No Yes

UCITS ESMA / UCITS Prospectus/SAI Yes Yes Yes

Separate Account Client IMA Depends Depends Depends

(1) When looking at eVestment data for several large asset managers, we found that nearly 90% of AUM was in mutual funds and separate accounts as of Q3 2023

(2) 40-Act limit depends on the mutual fund’s approach to repo under SEC rule 18f-4. Prior to 2020 introduction of 18f-4, repo was typically limited to 50%.

Table 1: Asset Management Products Regulatory Requirements for Repo and Futures Usage 
Asset Managers: Product Mix Tends to Favor Futures 

Relative to Treasury Repo

➢ Mutual funds are regulated by the Investment Company Act of 1940 (“40-Act”)

➢ While established in 1940, various rules and amendments to the 40-Act have been adopted over time.

➢ For many years prior to 2020, the applicable rules created incentives for mutual funds to favor derivatives like futures

over repo in certain cases, including limitations on the size of repo borrowing.

➢ Rule 18f-4 adopted in 2020 established a new option for mutual funds to treat repo like other derivatives (which are

subject to a “VaR test”), though some funds may not have updated their documentation or practices to utilize it. Given

the change was relatively recent, its potential impacts warrant further investigation.

➢ If not using this new option, mutual funds must limit their repo borrowing to 50% of NAV to meet the applicable asset

coverage requirements.

➢ In our view, many mutual funds are still limiting the size of their repo borrowing and achieving leverage through futures.

➢ Separate accounts are typically governed by the client investment management agreement (IMA)

and associated investment guidelines.

➢ Partial but representative data(1) suggests that most institutional accounts do not permit repo.

➢ Futures therefore are in many cases the only way to obtain leverage in a separate account.

13

Core / Core Plus Short Duration Inflation Credit

% SMA AUM that allows economic leverage 74% 98% 77% 84%

% SMA AUM that allows usage of repo 54% 12% 25% 25%

% SMA AUM that allows usage of Tsy futures 78% 27% 85% 97%

Table 2: Separately Managed Accounts Investment Guidelines for Repo/Futures (1)

(1) Sourced from presenter firm’s data and may not correlate with aggregate industry level
Asset Managers: 40-Act Mutual Fund Investment Expense 

Accounting Also Favors Futures

➢ While 40-Act mutual funds can use repurchase agreements, the “interest expense” associated with

repos must be reported separately as an investment expense.

➢ In 2018, in accordance with FINRA Rule 2210(d)(5), some fund analysis providers started including

“interest expense” in their databases of total expense ratios which include management fees and

administrative fixed-costs.

➢ This change had the effect of making providers who prioritize Treasury repo over futures look more

expensive, even though the two products are similar economically and repo is often less expensive.

➢ FINRA issued clarification D.1.2. in 2019, and while efforts have been made to exclude interest

expense from published expense ratios(1), the reality is that if a fund has high interest expense, it

raises questions, even if interest expense generally associated with portfolio structures or leverage

that are expected to add value to the overall portfolio.

14

(1) One Expense Ratio to Rule Them All | Morningstar

Typical Mutual Fund Operating 

Expenses Listed in Prospectus

Management Fees

Distribution Fees

Legal Fees

Interest Expense

Acquired Fund Fees
Asset Managers: Largest Fixed-Income Categories

➢ The largest fixed-income mutual fund category is intermediate core / core plus at 39% of total

assets. Many funds are benchmarked to the Bloomberg U.S. Aggregate Index (“the Agg”),

which is a fairly good, but not complete, representation of the U.S bond market.

➢ Recently flows into short-duration products have also been substantial, where many funds are

benchmarked to 1-3Y Government/Credit and 1-3Y Corporate indices.

➢ We go into some detail on the composition of these indices in the next slide.

15

Morningstar Sub-Category Total Net Assets 

($Bn)

% Fixed-Income 

Category

Intermediate Core-Plus Bond 681 25%

Intermediate Core Bond 381 14%

Short-Term Bond 339 12%

Multisector Bond 267 10%

High Yield Bond 244 9%

Ultrashort Bond 142 5%

Nontraditional Bond 109 4%

Inflation-Protected Bond 85 3%

Intermediate Government 82 3%

Corporate Bond 75 3%

Bank Loan 75 3%

Global Bond-USD Hedged 56 2%

Global Bond 46 2%

Emerging Markets Bond 43 2%

Other 109 4%

Total 2,734 100%

Table 3: Fixed-Income Mutual Fund Sector Breakdown (1)

(1) Sourced from Morningstar as of 12/29/2023

Core + Core Plus + 

Multisector

Short 

Duration

All Other

-100

0

100

200

300

400

500

600

700

800

06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Figure 13: Cumulative Fixed-Income Strategy Flows

(2006-2023, $bn) (1)
Asset Managers: Benchmark Indices

➢ Presently, the Agg is about 42% Treasuries, and in total, about 80% government risk (1).

It is an investment-grade only, market value weighted index. The 1-3Y Gov/Credit index

is 66% Treasuries and over 70% government risk.

➢ Notably, the main explanatory market risk factor for the Agg is the level of Treasury

yields, which generally account for over 75% of the modeled risk of the index.

(1) The term “government risk” refers to Treasury debt, Agency debt, and Agency MBS and is highlighted in red. 16

(2) Sourced from Bloomberg as of 12/29/2023. Treasury weights exclude SOMA holdings.

Table 4: Bloomberg Aggregate Index (2)

Sector Market 

Value % YTM Duration

Treasuries 42% 4.07 6.15

Government Related 5% 4.59 5.26

Agency 2% 4.44 3.42

Local Authority 1% 4.80 8.03

Sovereign 1% 5.20 8.58

Supranational 1% 4.22 3.47

IG Corporate 25% 5.09 7.10

Industrial 14% 4.97 7.85

Utility 2% 5.10 8.82

Financial Institutions 8% 5.31 5.31

Securitized 29% 4.67 5.53

Agency MBS 27% 4.63 5.66

ABS 0% 4.92 2.76

CMBS 2% 5.36 4.26

Total 100% 4.52 6.17

Table 5: Bloomberg 1-3Y Government Credit (2)

Sector Market 

Value %

Yield to 

Maturity Duration

Treasuries 66% 4.30 1.89

Government Related 8% 4.55 1.71

Agency 5% 4.58 1.68

Local Authority 0% 4.52 1.86

Sovereign 0% 4.81 1.70

Supranational 3% 4.46 1.72

IG Corporate 25% 5.13 1.78

Industrial 12% 4.91 1.74

Utility 1% 5.10 1.81

Financial Institutions 12% 5.36 1.82

Total 100% 4.53 1.85
Asset Managers: Structural Credit Overweights

➢ When managing against the Bloomberg Aggregate Index, active managers will often

allocate to higher yielding spread assets to achieve an income advantage and a more

diversified portfolio given the heavy interest rate sensitivity of the benchmark.

➢ Spread sector investment decisions are made in assets of varying durations and

maturities, and are often thought of separately from interest rate investment decisions.

➢ Although asset managers have different investment approaches, we believe it’s common

to separate decisions made on interest rate duration and credit spread duration.

➢ Futures allow asset managers to make credit allocation decisions relatively seamlessly,

without impacting interest rate risk exposures, but can introduce basis risk between the

futures allocation and the Treasury allocation in the index.

➢ While the process is more precise with Treasuries + repo, it is more cumbersome to

implement operationally.

➢ It’s likely that structural overweight positions in credit products could result in

persistently higher allocations to Treasury futures amongst asset managers.

17
Asset Managers: Structural Credit Overweights

When allocating out of Treasuries into credit sectors, we highlight two broad transaction types. We focus 

on the second type and the implications for how asset managers hedge duration and curve.

➢ Matched substitution: The manager buys a credit and can sell a Treasury of similar duration.

➢ Results in a reduction of the Treasury allocation and an increase in credit exposure. Minimal need for futures or repo.

➢ Mismatched substitution: The manager buys a credit and must sell a Treasury of different duration.

➢ To control for duration and curve risk, the manager will need to use futures or repo and reverse repo(1).

➢ This happens for several reasons, to name a few:

(1) Manager buys a floating rate credit asset with zero duration.

(2) Manager runs out of similar duration Treasuries to sell from the portfolio.

(3) Manager buys a non-USD credit asset.

18

Table 6: Ways to Hedge Duration and Curve Risk With 

Mismatched Treasury/Credit Substitution

Type Transactions Involved Cost/Benefit

Perfect Hedge with 

Repo and Borrow

(1) Buy credit

(2) Short perfect Treasury hedge

(3) Borrow perfect Treasury

(4) Repo another Treasury to fund credit 

- Most operationally complex

- Generates interest expense

Partial Hedge with 

Repo Only

(1) Buy credit

(2) Short Treasury futures hedge

(3) Repo another Treasury to fund credit

- Some operational complexity

- Generates interest expense

- Introduces some curve risk

Futures Hedge (1) Buy credit

(2) Sell Treasury

(3) Execute futures curve trade

- Less operationally complex

- Introduces basis and curve risk

(1) Note, we assume portfolio managers will typically use the cheapest form of repo with lowest haircut (Treasuries)

(2) Sourced from Bloomberg as of 12/29/2023.

10.4%

14.4%

4.7%

3.6% 3.6%

4.9%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

1-2y 3-5y 5-7y 7-10y 10-20y 20y+

Figure 14: Bloomberg Agg Index 

Treasury Allocation by Maturity Bucket(2)
Asset Managers: Structural Credit Overweights

➢ A separate complication, which is obscure but meaningful, is that portfolio managers will

sometimes treat credit duration differently than risk-free duration. This matters more for

lower quality credit products, where spread volatility dwarfs interest rate volatility. Bonds

that trade on dollar price, like lower rated high yield, exhibit lower “empirical duration.”(1)

➢ Therefore, an allocation out of Treasuries into lower quality credit, would typically require

a manager to buy back more duration in futures, compared to higher quality credit.

19 (1) Empirical duration can be thought of as a statistical duration as opposed to a cash flow duration

(2) Sourced from Bloomberg as well as the presenter’s firm’s calculations as of 01/10/2024

Adjusted Duration Used 

for Hedging Rate Risk

Model, or Cash 

Flow Duration

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

15 16 17 18 19 20 21 22 23 24

Figure 15: Bloomberg High Yield

Bond Index(2)
Asset Managers: Structural Credit Overweights

Four examples(1) where a mismatched substitution results in a net long position in futures:

➢ Example 1: Buying a floating rate asset

➢ Manager sells Treasuries, replaces risk with Treasury futures, buys a floating rate CLO.

➢ Since the CLO has no duration, for a 5% allocation, a +5.0% net futures position is created.

➢ Example 2: Buying an asset with duration < 2 years

➢ Manager sells Treasuries, replaces risk with Treasury futures, buys a 1y duration ABS, hedges duration with TU futures.

➢ For a 5.0% allocation to the ABS, a +1.7% net futures position is created, net duration change is zero.

20

Trade Security Notional % Cash % Duration 

Contrib Wtd Avg Life Yield OAS

Sell Treasury -5.0% -5.0% (0.31) 7.9 4.10%

Buy Treasury Futures 4.8% 0.31 

Buy CLO 5.0% 5.0% 0.00 2.0 8.00% 2.32%

Net Treasury Futures 4.8%

Net Change to Fund(2) 0.0% 0.00 0.12% 0.12%

Trade Security Notional % Cash % Duration 

Contrib Wtd Avg Life Yield OAS

Sell Treasury -5.0% -5.0% (0.31) 7.9 4.1

Buy Treasury Futures 4.8% 0.31 

Buy Short-Dated ABS 5.0% 5.0% 0.06 1.2 6.7 2.14%

Sell TU Futures Hedge -3.1% (0.06)

Net Treasury Futures 1.7%

Net Change to Fund(2) 0.0% 0.00 0.11% 0.11%

(1) Data in the examples shows the presenter’s firm’s calculations

(2) These simplified examples exclude potential yield impact of Treasury-futures basis or FX hedging cross-currency basis
Asset Managers: Structural Credit Overweights

Four examples(1) where a mismatched substitution results in a net long position in futures:

➢ Example 3: Buying a high spread credit asset

➢ Similar to previous examples, but the high-risk credit is modeled with a duration less than its cash flow weighted duration.

Because of this, the manager has to sell fewer futures to hedge the credit allocation than are bought to replace Treasuries.

➢ Example 4: Buying a Non-USD asset

➢ Also similar to previous examples. In this case, the manager buys a non-USD credit with a different base currency curve.

➢ For a 5.0% allocation to the credit, the manager ends up long 5.0% Treasury futures and short 5.0% non-USD futures.

21

Trade Security Notional % Cash % Duration 

Contrib Wtd Avg Life Yield OAS

Sell Treasury -5.0% -5.0% (0.31) 7.9 4.1

Buy Tsy Futures 4.8% 0.31 

Buy High Yield Corp 5.0% 5.0% 0.08 5.3 7.9 3.33%

Sell Tsy Futures Hedge -2.1% (0.08)

Net Treasury Futures 2.6%

Net Change to Fund(2) 0.0% 0.00 0.17% 0.17%

Trade Security Notional 

%

Cash % Duration 

Contrib Wtd Avg Life Yield OAS

Sell Treasury -5.0% -5.0% (0.31) 7.9 4.1

Buy Treasury Futures 4.8% 0.31 

Buy EUR IG Credit 5.0% 5.0% 0.22 7.2 3.9 1.40%

Sell 5Y Bobl Futures Hedge -5.0% (0.22)

Sell EUR/USD Fwd -5.0%

Net Treasury Futures 4.8%

Net Change to Fund(2) 0.0% 0.00 0.07% 0.07%

(1) Data in the examples shows the presenter’s firm’s calculations

(2) These simplified examples exclude potential yield impact of Treasury-futures basis or FX hedging cross-currency basis
Asset Managers: Structural Credit Overweights

➢ Stylized example shows what an active manager’s allocation could often look like (Figure 17)

compared to an index (Figure 16). In this example, the actively managed portfolio has a 20% out-ofindex credit allocation and a higher yield than the index but maintains the same duration and yield

curve exposure.

➢ To accomplish this, the active positions are funded by selling Treasuries, the net duration and curve

are hedged with Treasury futures (resulting in a net long futures exposure and positive net leverage).

➢ Alternatively, the manager could have repo’d Treasuries to fund the allocations which would have

generated interest expense.

22

42%

5%

25%

29%

Treasuries

Treasury Futures

Government Related

Corporates

Agency MBS

Floating Rate Credit

High Yield

Securitized Products

Non-US Credit

Non-US Rate Futures

0% 20% 40% 60%

Figure 16: Bloomberg Agg Index

Aggregate Index Active Manager

Yield Duration Avg. OAS Yield Duration Avg. OAS

4.52 6.17 0.38 5.36 6.17 1.07

22%

14%

5%

25%

29%

5%

5%

5%

5%

-4%

Treasuries

Treasury Futures

Government Related

Corporates

Agency MBS

Floating Rate Credit

High Yield

Securitized Products

Non-US Credit

Non-US Rate Futures

-20% 0% 20% 40%

Figure 17: Hypothetical Active Manager

(1) Sourced from Bloomberg as of 12/29/2023 and the presenter’s firm’s calculations

(2) Sourced from Bank of America as of Dec 2023

Compared to the AGG ex. 

Treasury Market Value

Compared to the 

AGG Market Value

3%

4%

5%

6%

7%

8%

9%

10%

14 15 16 17 18 19 20 21 22 23

Figure 18: Recent Growth in Floating 

Securitized Assets(2)
Asset Managers: Structural Credit Overweights

Looking deeper at index and industry data, two observations are worth investigating further:

(1) There appears to be a positive relationship between the Treasury allocation in the Aggregate Index(1),

and the CFTC asset manager net futures position (as a % of the Treasury market), shown in Figure 19

➢ It’s not obvious why this relationship exists. One possible explanation is that as Treasury allocations have risen over time, asset

managers chose to increase their overweights to higher returning credit sectors relative to Treasuries.

(2) Using eVestment data(2) and looking at rough sector positioning for 14 large core and core plus active

management platforms ($900bn AUM), there does appear to be a correlation between the AUM

weighted active credit sector exposure and the CFTC asset manger net futures position

➢ This relationship lends some support to the hypothesis that Treasury futures are used to fund active credit sector positions

➢ It does not prove the point definitively, however. More investigation into the types of credit assets owned is required.

(1) Sourced from Bloomberg, CFTC, and the presenter’s firm’s calculations as of 12/29/2023 23

(2) Sourced from eVestment as of Q3 2023

Treasury Weight in 

Aggregate Index 

(%,Left Axis)

CFTC Asset Manager 

Net Futures Position 

(%Tsy Mkt ex. SOMA, 

Right Axis)

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

20%

25%

30%

35%

40%

45%

06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Figure 19: Treasury Index Weight vs. 

Asset Manager Net Futures Position % of Tsy Mkt

Active NonGovernment 

Exposure 

(%NAV, Left 

Axis)

CFTC Asset 

Manager Net 

Futures ($Bn 

Face, Right 

Axis)

0

100

200

300

400

500

600

700

800

14%

16%

18%

20%

22%

24%

26%

28%

30%

15 16 17 18 19 20 21 22 23

Figure 20: eVestment Active Non-Govt Allocation

AUM Weighted Avg of 14 Large Asset Managers
Illustration of Futures Replication Costs

➢ In Figure 21 we show the cumulative performance costs from replicating the Bloomberg

Treasury Index with the 6 available Treasury futures contracts.

➢ The methodology assumes a key-rate duration hedged portfolio and subtracts the cash

return using the overnight SOFR rate.

➢ Importantly, the return shown here is not the same as a pure basis trade (long CTD,

short Treasury future), it includes the performance of the whole Treasury market.

➢ From 2018-2023, futures replication had an average annual cost of 0.45%. Most fixedincome spread products have hurdled that carry cost (Figure 23).

24

-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

Apr-18

Oct-18

Apr-19

Oct-19

Apr-20

Oct-20

Apr-21

Oct-21

Apr-22

Oct-22

Apr-23

Oct-23

Figure 21: Cost of Replicating 

Bloomberg Treasury Index with 

Futures(1)

Average Annual 

Return = -0.45%

0.0%

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

0.7%

0.8%

Apr-18Oct-18Apr-19Oct-19Apr-20Oct-20Apr-21Oct-21Apr-22Oct-22Apr-23Oct-23

Figure 22: Trough to Peak 

Changes in Futures Replication 

Performance(1)

0.45%

1.00%

1.21%

3.68%

4.03%

0.0% 2.5% 5.0%

Futures Replication

Agency MBS

IG Credit

EM External Debt

HY Credit

Figure 23: Credit Spreads vs. 

Cost of Tsy Futures (2018-2023 

Avg)

(1) Data shows the presenter’s firm’s calculations as of 12/29/2023
25

Leveraged Fund Discussion
How Do Leveraged Funds Use Treasury Futures?

➢ Leveraged funds typically use futures for some of the same reasons asset managers do:

1. Taking directional views on duration and yield curve

2. Hedging and managing interest rate risk across different sectors

➢ One important difference, however, is that leveraged funds employ relative-value strategies with

greater size relative to their assets under management (more leverage).

➢ These relative-value strategies seem likely to reside mostly within the multimanager community, and

potentially within some single strategy relative-value or quantitative hedge funds.

➢ As shown in Figure 24, because of strong performance, multimanager strategies have grown faster

than the rest of the industry. With this may have come a growth in dedicated relative value AUM.

26

Strategy Typical Use of 

Futures?

Macro Directional

CTA/Momentum Directional

Risk Parity Directional

Quant Directional + RV

Relative-Value RV

Multimanager Directional + RV

Hedge Fund Strategies

Multimanager AUM 

($Bn, Right Axis)

AUM % of Hedge 

Fund Industry 

(Left Axis)

0

50

100

150

200

250

300

350

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

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

Figure 24: Growth in Multimanager AUM (1)

(1) Sourced from Goldman Sachs Research as of Dec 2022
How Do Leveraged Funds Use Treasury Futures?

➢ While asset managers have shown a net long bias in futures, the opposite is true of leveraged funds,

which have showed a persistent net short bias, despite large swings in markets.

➢ Similar to the discussion about asset managers, we think it’s unlikely that directional positions are

generating a structural bias to futures positioning recently.

➢ But large hedge funds and CTA’s are likely to have influenced shorter term positions at various times.

➢ As has been discussed extensively by regulators and market participants, it seems most likely to us

that the persistent futures short by leveraged funds reflects Treasury basis relative-value positions.

➢ As we showed on the prior slides, there is a persistent risk premium to be harvested in Treasury

futures basis. It appears that asset managers are willing to pay this premium to invest in higher

yielding products, while hedge funds earn the premium.

27

R2 = 0.92

-1000

-800

-600

-400

-200

0

200

400

-200 0 200 400 600 800 1000

Leveraged Fund Net Futures ($Bn 

Face)

Asset Manager Net Futures ($Bn Face)

Figure 25: >90% R^2 Between Asset Manager 

& Leveraged Fund Net Positions Since 2015 • Asset manager and

leveraged fund positions

track each other with a 92%

R^2 since 2015

• Logically, it makes little

sense that these two

investor categories would

take opposing directional

views with such a high

frequency

• Structural factors seem

more likely to explain this

relationship, where hedge

funds facilitate structural

futures demand by asset

managers as the Treasury

market has grown

(1) Sourced from CFTC as of Dec 2023 and the presenter’s firm’s calculations
Leveraged Funds: Returns in the Treasury Basis Trade

➢ We can estimate the returns to the basis trade using the data on the cost of futures replication:

➢ We assume a leverage ratio of 20x and show cumulative performance (excess of cash return).

➢ Anecdotally, 20x appears to be a good approximation of leverage typically used in these trades. Repo and futures margins

do permit higher leverage, however. 20x leverage could generate 9-10% annualized excess returns using this framework.

➢ March 2020 would have more than wiped out equity capital in such a strategy, explaining the stress during this period. To

the extent these strategies live inside of multimanagers, other capital may have been injected during this period.

28

20X 

Leverage

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

2018 2019 2020 2021 2022 2023

Figure 26: Cumulative Excess Returns

Treasury Index vs. Futures

Peak to 

Trough 

Drawdown

"Equity" 

Capital

-16.0%

-14.0%

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2018 2019 2020 2021 2022 2023

Figure 27: Peak to Trough Drawdown 

Using 20x Leverage Multiple

(1) Data shows the presenter’s firm’s calculations as of 12/29/2023
Leveraged Funds: Returns in the Treasury Basis Trade

➢ The performance we show is an approximation and not that of a pure basis trade (future vs. CTD).

➢ That said, it’s likely that hedge funds who implement the basis trade do so in ways that involve using

Treasuries other than CTDs, with numerous other real-world complexities to consider, including:

➢ Type of repo funding (term v. daily)

➢ CTD switch option (recall volatility in USZ3 in Fall 2023)

➢ Spot vs. deferred CTD analysis

➢ Futures roll timing, optimal delivery and wildcard option

➢ Barriers to entry given balance sheet scarcity/repo capacity

➢ Usage of cheaper off-the runs

➢ In addition to expensive implied repo, looking below, we see that futures CTDs can often trade with

negative spreads to Treasury fitted curve.

➢ Similar to “on-the-run” Treasuries, it’s likely that CTDs trade this way due to a liquidity premium vs. off-the-runs.

➢ Recalling the period of March 2020, dealers reported(1) large liquidations in off-the-run sectors from the relative-value

community, suggesting that basis implementation involves more varied expressions.

29

(12)

(10)

(8)

(6)

(4)

(2)

0

2

4

6

0 5 10 15 20 25 30

OAS (bp)

Maturity (Yrs)

Figure 28: Example Treasury OAS Curve (ex. High Coupons)

2Y

3Y

5Y

7Y

10Y

20Y

30Y

OTR

CTD

(1) See page 56 of this report https://home.treasury.gov/system/files/221/CombinedChargesforArchivesQ22021.pdf
Leveraged Funds: Estimating Size of the Basis Trade

➢ Recent research from the Fed (1) suggests that the basis trade has grown in size lately, similar to

levels seen in 2018-2019. They cite the futures data, but also show some evidence from the

sponsored repo market and collateral posting data, shown below:

➢ Another piece of research(2) released in September of 2023 quantifies the basis trade at $550bn at the end of 2022.

➢ The authors used data from form PF, and the size seems fairly consistent with size of futures exposure at the time.

➢ Bottom line, estimating size of relative-value AUM is hard especially as a large portion of capital pursuing these strategies

may be embedded in multimanager hedge-funds, where little public data on sub-strategy allocations is available.

30 (1) https://www.federalreserve.gov/econres/notes/feds-notes/recent-developments-in-hedge-funds-treasury-futures-and-repo-positions-20230830.html

(2) https://www.federalreserve.gov/econres/notes/feds-notes/hedge-fund-treasury-exposures-repo-and-margining-20230908.html
Leveraged Funds: Monitoring the Basis Trade

Some potential metrics to consider monitoring: 

31

Item Notes

Treasury Futures Open Interest Relative to the Size of Treasury Market • Disproportionate growth could indicate excessive

systemic leverage.

Size of Cleared Repo Market • Will be more valuable when all Treasury repo is

cleared in 2026.

Treasury-Futures Basis Valuations • Viewed in the context of changes to open interest,

valuations could be an important indicator.

• For example, if cash richens vs. futures and open

interest is growing, suggests position crowding.

Dealer Inventories of Treasury Securities • Supplement with real time flow color in off-the-run

trading activity.

Term structure of Repo Funding Levels • Monitor overnight vs. term repo spreads as an

indicator of funding pressures.

Changes in Margin Requirements • Monitor CME exchange margins and repo.

Concentration of Funding Sources in Bilateral Repo Market • Overreliance on single institutions could create

counterparty risk.
32

Potential Interactions Between Asset 

Managers & Levered Fund Positions
Potential Interactions to Consider

➢ Amidst record Treasury issuance, and procyclical fiscal stimulus, we conclude that a symbiotic

relationship has emerged between asset managers and hedge funds.

• Large procyclical deficits have driven Treasury weights higher in bond indices at a time when the economy is

relatively healthy and active bond managers prefer credit relative to Treasuries.

• This cyclical preference for credit, alongside the structural asset allocation of active bond managers, may be

resulting in lower cash Treasury demand and increased use of Treasury futures.

• This preference for futures vs. cash improves valuations and the investment opportunity for RV hedge funds.

➢ While the system seems stable to us now, it’s worth thinking through potential risks that might arise,

as asset managers have moved down in liquidity while hedge funds have increased leverage.

• A reduction in credit risk by asset managers would naturally facilitate unwinding the basis trade by hedge funds.

• However, if asset managers experience rapid outflows while market liquidity is impaired, these outflows could

initially be funded through Treasury sales. This type of behavior could pressure RV basis positions, and it’s possible

this dynamic was at play during March 2020 when everyone in the market scrambled for liquidity. We see below a

high tail risk correlation between Treasury-futures basis performance and 1-3y Corporate spreads. This period

likely also simply reflected extreme liquidity preference which would pressure secured vs. unsecured funding

spreads.

33

1-3Y Corporate

OAS (Left Axis)

Tsy Index Excess 

Return 15X Leverage 

Drawdown from 

Peak

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

0.25

0.75

1.25

1.75

2.25

2.75

3.25

3.75

4.25

2018 2019 2020 2021 2022 2023

Figure 30: Short Maturity Credit Spreads 

vs. Proxied Basis Trade Drawdowns

Deficit (%GDP, Right 

Axis)

U3 (Inverted, Left Axis)

-15

-13

-11

-9

-7

-5

-3

-20

-15

-10

-5

0

5

90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24

Figure 29: Trailing 1Y US Deficit (%GDP) vs. 

1Y Average Unemployment Rate

(1) Sourced from Bloomberg and the presenter’s firm’s calculations as of Dec 2023
Conclusions and Areas of Further Research

➢ The structural asset allocation preference of active fixed-income managers appears to

create a need to own Treasury futures persistently over time.

➢ Procyclical fiscal stimulus, which has contributed to rising Treasury allocations in bond

indices alongside a healthy economy, may be amplifying this trend.

➢ While there is a cost to using Treasury futures, this cost is easily hurdled by active

managers who are allocating out of Treasuries into more attractive sectors.

➢ Persistent demand for Treasury futures likely contributes to rich valuations when

compared to Treasury bonds. This valuation creates an investment opportunity for

relative-value strategies that can utilize leverage to exploit small price differences.

➢ There are a number of relationships that are worthwhile for Treasury to monitor when

tracking the Treasury futures basis trade over time. Treasury repo clearing may provide

an opportunity to gain greater insights in the coming years.

➢ Potential areas of future study could include the following:

➢ More granular research into asset manager quarterly holdings through time.

➢ More detailed analysis of the size of non-index credit and floating rate markets.

➢ Quantitative modeling of variables that seem to contribute to asset manager futures positions, including

the size of the Treasury allocation in the index, quarterly estimates of credit holdings, and empirical

duration exposure of major bond mutual funds.

➢ Greater study of potential interactions between asset manager and leveraged funds, particularly during

times of market stress and liquidity contraction.

34