Treasury Presentation to TBAC
Office of Debt Management

Fiscal Year 2021 Q3 Report
Table of Contents

2

I. Executive Summary p. 4

II. Fiscal

A. Quarterly Tax Receipts p. 6

B. Monthly Receipt Levels p. 8

C. Largest Outlays p. 9

D. Treasury Net Nonmarketable Borrowing p. 10

E. Cumulative Budget Deficits p. 11

F. Deficit and Borrowing Estimates p. 12

G. Budget Surplus/Deficit p. 13

H. Privately-Held Net Marketable Borrowing Outlook p. 14

III. Financing

A. Sources of Financing p. 17

B. Interest Rate Assumptions p. 19

C. Projected Net Marketable Borrowing Assuming Future Issuance Remains Constant p. 20

IV. Portfolio Metrics

A. Historical Weighted Average Maturity of Marketable Debt Outstanding p. 22

B. Bills, TIPS & FRNs Outstanding as a Percent of Marketable Debt Outstanding p. 23

C. Maturity Profile p. 25

V. Demand

A. Summary Statistics p. 27

B. Bid-to-Cover Ratios p. 28

C. Investor Class Awards at Auction p. 33

D. Primary Dealer Awards at Auction p. 37

E. Direct Bidder Awards at Auction p. 38

F. Foreign Awards at Auction p. 39

G. Foreign Holdings: Official and Private p. 40
Section I:

Executive Summary

3
Receipts and Outlays through Q3 FY2021

• Overall receipts totaled $3.056 trillion, reflecting an increase of $796 billion (35%) compared to the same period last fiscal year. Non-withheld and 

SECA taxes were $476 billion (176%) higher because last year both estimated and final taxes were delayed until July 15. Corporate taxes were $178 

billion (142%) higher, as every month except one (November 2020) has seen higher levels than last fiscal year. The difference will narrow when 

looking at the full fiscal year as last year’s due dates were deferred to Q4 FY2020. Adjusted withheld and FICA taxes were up $147 billion (8%) due 

to the economic impact of COVID‐19 and the end of the deferral of certain employer taxes through the end of December 2020. Half of these 

deferred taxes are due by the end of this calendar year and the remaining half by the end of 2022. Federal Reserve earnings were $14 billion (25%) 

higher reflecting lower interest rates that reduce the Fed's interest expenses and higher System Open Market Account (SOMA) holdings that can 

increase remittances. Partially offsetting the overall gains to receipts, individual refunds were $32 billion (16%) higher, but close to the 2019 level. 

This refund season is exhibiting a different pattern from last year due to tax season timing changes and other factors. Corporate refunds were $5 

billion (15%) higher, likely due to provisions of the CARES Act that expand allowances for net operating losses. Receipts were 18.2% of GDP, 

compared to 14.3% for the same period last year. 

• Overall outlays were $5.29 trillion, reflecting an increase of $290 billion (6%) over the comparable period last fiscal year. Department of Treasury 

outlays were $379 billion (37%) higher due to higher Economic Impact Payments and other tax credits $305 billion (74%), Coronavirus Relief Fund 

payments to state, territorial, local, and tribal governments $45 billion (30%), rental assistance payments $33 billion, interest on the public debt $14 

billion (3%), and airline assistance grants $8 billion (34%). Exchange Stabilization Fund activities were lowered by $32 billion (-145%). Department 

of Labor outlays were $50 billion (18%) higher due to increased unemployment and expanded benefits attributable to the COVID-19 pandemic. 

Small Business Administration outlays were $212 billion (-40%) lower, mainly due to the differences in the recognition of subsidy costs for PPP. 

Health and Human Services spending was $42 billion (-4%) lower mainly due to the COVID-19 effects seen in Medicare last year and somewhat 

offset by increases in Medicaid. Outlays were 31.4% of GDP, compared to 31.8% for the same period last year. 

Projected Net Marketable Borrowing

• Treasury’s Office of Fiscal Projections (OFP) currently forecasts a net privately-held marketable borrowing need of $673 billion for Q4 FY2021, with 

an end-of-September cash balance of $750 billion. For Q1 FY2022, OFP forecasts a net privately-held marketable borrowing need of $703 billion and 

assuming an end-of-December cash balance of $800 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. The end-of-September and December cash balances assume enactment of a 

debt limit suspension or increase.

Demand for Treasury Securities

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

• Foreign demand remained stable.

Highlights of Treasury’s August 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

(200%)

(100%)

0%

100%

200%

300%

400%

500%

600%

700%

800%

900%

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

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

Year-over-Year % Change

Quarterly Tax Receipts

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

0

500

1000

1500

2000

2500

Corp Tax Nonwithheld

with SECA

Withheld

with FICA

$bn

Fiscal Year Cumulative Receipts

FY2019 through June FY2020 through June FY2020 July FY2021 through June
8

0

50

100

150

200

250

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

Mar-15

Jun-15

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

$bn

Monthly Receipt Levels

(12-Month Moving Average)

Individual Income Taxes Corporate Income Taxes Social Insurance Taxes Other

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 
9

Source: United States Department of the Treasury 

0

200

400

600

800

1,000

1,200

1,400

1,600

Treasury

HHS

SSA

Defense

Labor

SBA

Agriculture

VA

Education

OPM

Transportation

Homeland Security

Other Defense Civil

$ bn

Largest Outlays

Oct - Jun FY 2020 Oct - Jun FY 2021
10

Source: United States Department of the Treasury

(40)

(30)

(20)

(10)

0

10

20

30

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

$ bn

Fiscal Quarter

Treasury Net Nonmarketable Borrowing

Foreign Series State and Local Govt. Series (SLGS) Savings Bonds
11

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
12

1 Estimates represent the medians from the primary dealer survey in July 2021. The FY2021 net borrowing estimates are normalized 

with an assumption of end-of-September 2021 cash balance of $750 billion. 

2 Treasury's Office of Fiscal Projections (OFP) borrowing estimates announced on August 2, 2021.

3 CBO projections are using estimates are from Table 1 of “An Update to The Budget and Economic Outlook: 2021 to 2031,” July 

2021. 

4 OMB projections are using estimates are from Table 10 of “Budget of The U.S. Government Fiscal Year 2022,” May 2021. 

*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.

Primary Dealers1 OFP2 CBO3 OMB4

FY2021 Deficit Estimate 3,000 3,003 3,669

FY2022 Deficit Estimate 1,500 1,153 1,837

FY2023 Deficit Estimate 1,164 789 1,372

FY2021 Deficit Estimate Range 2,800-3,468

FY2022 Deficit Estimate Range 1,130-1,930

FY2023 Deficit Estimate Range 789-1,600

FY2021 Privately-Held Net Marketable Borrowing Estimate 2,075 1,990 1,995 3,150

FY2022 Privately-Held Net Marketable Borrowing Estimate 1,553 1,380 2,098

FY2023 Privately-Held Net Marketable Borrowing Estimate 1,129 764 1,418

FY2021 Privately-Held Net Marketable Borrowing Range 1,785-3,400

FY2022 Privately-Held Net Marketable Borrowing Range 1,150-2,450

FY2023 Privately-Held Net Marketable Borrowing Range 790-1,600

Estimates as of: Jul-21 Aug-21 Jul-21 May-21

FY 2021-2023 Deficits and Privately-Held Net Marketable Borrowing Estimates*, in $ billions
(20.0%)

(17.5%)

(15.0%)

(12.5%)

(10.0%)

(7.5%)

(5.0%)

(2.5%)

0.0%

(4,000)

(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 2031

Deficit to GDP

$bn

Budget Surplus/Deficit*

OMB's (May 21) Surplus/Deficit (LHS) CBO's (Jul 21) Surplus/Deficit (LHS)

PD Survey (Jul 21) (LHS) OMB's (May 21) Surplus/Deficit as a % of GDP (RHS)

CBO's (Jul 21) Surplus/Deficit as a % of GDP (RHS)

*OMB’s projections are from OMB’s Table S-10 of “Budget of The U.S. Government Fiscal Year 2021,” May 2021.

CBO’s deficit projections are using estimates from CBO’s Table 1 of “An Update to The Budget and Economic Outlook: 2021 to 

2031,” May 2021.

Projections

13
14

* 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.

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 22 (projection-OFP) FY 21 (projection-OFP)
Section III:

Financing

15
16

Assumptions for Financing Section (pages 16 to 19)

• Portfolio and SOMA holdings as of 06/30/2021.

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

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

outstanding of ~$4.28 trillion. 

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

as of 06/30/2020.

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

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

Net Bill Issuance (394) Security Gross Maturing Net Gross Maturing Net

Net Coupon Issuance 713 4-Week 520 500 20 1,320 1,280 40

Subtotal: Net Marketable Borrowing 319 8-Week 520 490 30 1,440 1,400 40

13-Week 741 708 33 2,151 2,112 39

Ending Cash Balance 852 26-Week 702 663 39 2,034 1,986 48

Beginning Cash Balance 1,122 52-Week 102 93 9 340 221 119

Subtotal: Change in Cash Balance (270) CMBs

6-Week 520 475 45 1,315 1,255 60

Net Implied Funding for FY 2021 Q3** 589 15-Week 0 225 (225) 500 890 (390)

17-Week 455 390 65 1,245 1,225 20

22-Week 0 390 (390) 600 1,240 (640)

39-Week 0 20 (20) 0 90 (90)

Bill Subtotal 3,560 3,954 (394) 10,945 11,699 (754)

Security Gross Maturing Net Gross Maturing Net

2-Year FRN 80 56 24 234 167 67

2-Year 180 50 130 528 185 343

3-Year 174 62 112 510 177 333

5-Year 183 79 104 537 245 292

7-Year 186 89 97 540 234 306

10-Year 117 25 92 348 109 239

20-Year 75 0 75 223 0 223

30-Year 75 3 72 224 6 218

5-Year TIPS 34 41 (7) 66 41 25

10-Year TIPS 13 0 13 53 38 15

30-Year TIPS 0 0 0 9 0 9

Coupon Subtotal 1,117 404 713 3,272 1,201 2,071

April - June 2021 Fiscal Year-to-Date

Coupon Issuance Coupon Issuance

Sources of Privately-Held Financing in FY21 Q3*

April - June 2021 April - June 2021 Fiscal Year-to-Date

Bill Issuance Bill Issuance
18

* 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 August 2021 refunding. 

*** Assumes an end-of-September 2021 cash balance of $750 billion versus a beginning-of-June 2021 cash balance of $852 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*** 673

Net Coupon Issuance 661

Implied Change in Bills 12

Security Gross Maturing^ Net Gross Maturing Net

2-Year FRN 80 55 25 314 222 92

2-Year 180 91 89 708 276 432

3-Year 174 71 103 684 248 436

5-Year 183 85 98 720 329 391

7-Year 186 77 109 726 311 415

10-Year 117 32 85 465 141 324

20-Year 75 0 75 298 0 298

30-Year 75 3 72 299 9 290

5-Year TIPS 0 0 0 66 41 25

10-Year TIPS 29 32 (3) 82 70 12

30-Year TIPS 7 0 7 16 0 16

Coupon Subtotal 1,106 445 661 4,378 1,646 2,732

Coupon Issuance Coupon Issuance

Sources of Privately-Held Financing in FY21 Q4*

July - September 2021

July - September 2021 Fiscal Year-to-Date
19

0.5

1

1.5

2

2.5

3

3.5

4

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031

10-Year Treasury Note Rate, %

Interest Rate Assumptions: 10-Year Treasury Note

Implied Forward Rates as of 06/30/2021

CBO's "An Update to the Budget and Economic Outlook: 2021 to 2031" (July 2021)

OMB Budget (May 2021)

10-Year Treasury Rate 

of 1.469% as of 

06/30/2021
0

500

1,000

1,500

2,000

2,500

3,000

3,500

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031

$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: 2021 to 2031", July 2021 PD Survey Privately-Held Net Marketable Borrowing Estimates, July 2021

OMB's FY 2022 Budget of the U.S. Government OFP's FY 2021 Net Marketable Borrowing Estimate

PD 75th 

percentile

PD 25th

percentile

PD 50th

percentile

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

20

Projected Privately-Held Net Marketable Borrowing 

Assuming Private Coupon Issuance & Total Bills Outstanding Remain Constant as of 06/30/2021*

Treasury’s latest primary dealer survey median estimates can be found on page 12. OMB’s borrowing projections are from Table S-10 of “Budget of the U.S. 

Government Fiscal Year 2022,” May 2021. CBO’s borrowing projections are using estimates from Table 1 of CBO’s “An Update to The Budget and Economic 

Outlook: 2021 to 2031,“ July 2021. 

Future Fed purchases are derived from the Fed’s June 2021 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/2021/june-2021-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. 
Section IV:

Portfolio Metrics

21
22

40

45

50

55

60

65

70

75

80

198019811982198319841985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018201920202021

Weighted Average Maturity (Months)

Calendar Year

Historical Weighted Average Maturity of Marketable Debt Outstanding

Historical Historical Average from 1980 to end of Q3 FY2021

06/30/2021 

69.1 months

60.3 months (Historical Average 

from 1980 to Present)
23

0

5

10

15

20

25

30

35

40

198019811982198319841985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018201920202021

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%

06/30/21 

19.7%

06/30/21 

7.4%

06/30/21 

2.5%

Max 

35.6%
24

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

198019811982198319841985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018201920202021

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)

06/30/21 24%

06/30/21 $3,949 bn
25

20

30

40

50

60

70

80

198019811982198319841985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018201920202021

Percent

Calendar Year

Treasury Maturity Profile History

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

06/30/21 

54%

06/30/21 

31%
Section V:

Demand

26
27

*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 0.011 3.6 507.0 47.6 5.8 46.6 13.03 40.1 4.7

Bill 8-Week 0.017 3.4 512.8 53.2 7.6 39.3 7.19 40.1 9.3

Bill 13-Week 0.024 3.0 726.6 44.8 8.0 47.2 14.44 81.0 22.2

Bill 26-Week 0.039 3.3 689.9 40.5 5.2 54.4 12.14 76.7 42.2

Bill 52-Week 0.063 3.4 101.4 55.6 5.1 39.3 0.65 11.6 12.3

CMB 6-Week 0.015 3.5 519.6 45.8 7.5 46.7 0.47 0.0 6.5

CMB 17-Week 0.029 3.6 454.4 49.2 7.6 43.2 0.64 0.0 16.1

Coupon 2-Year 0.192 2.5 179.4 31.2 18.3 50.4 0.60 32.2 46.3

Coupon 3-Year 0.343 2.4 173.6 31.0 17.4 51.6 0.44 45.0 71.2

Coupon 5-Year 0.847 2.4 182.7 23.2 16.8 60.0 0.32 32.7 115.2

Coupon 7-Year 1.285 2.4 185.9 20.3 20.9 58.9 0.06 33.3 160.1

Coupon 10-Year 1.622 2.5 116.9 19.8 17.5 62.7 0.06 31.1 148.2

Coupon 20-Year 2.187 2.3 75.0 20.9 20.0 59.1 0.01 13.5 155.0

Coupon 30-Year 2.300 2.3 75.0 18.4 20.0 61.6 0.02 20.2 224.7

TIPS 5-Year -1.530 2.6 33.9 9.2 13.2 77.6 0.13 5.9 21.3

TIPS 10-Year -0.805 2.5 13.0 15.5 15.9 68.6 0.02 0.0 13.6

FRN 2-Year 0.031 3.1 79.9 36.0 2.3 61.7 0.07 5.3 0.0

Total Bills 0.024 3.4 3,511.5 46.6 6.8 46.5 48.57 249.6 113.3

Total Coupons 1.026 2.4 988.5 24.5 18.5 56.9 1.53 208.0 920.6

Total TIPS -1.329 2.6 46.9 10.9 14.0 75.1 0.14 5.9 35.0

Total FRN 0.031 3.1 79.9 36.0 2.3 61.7 0.07 5.3 0.0

Summary Statistics for Fiscal Year 2021 Q3 Auctions
1.5

2

2.5

3

3.5

4

Jul-16

Jan-17

Jul-17

Dec-17

Jun-18

Dec-18

Jun-19

Dec-19

Jun-20

Dec-20

Jun-21

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)

28
29

1.5

2

2.5

3

3.5

4

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

Bid-to-Cover Ratio

Bid-to-Cover Ratios for FRNs

(6-Month Moving Average)
30

1.5

2

2.5

3

3.5

4

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

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

1.5

2

2.5

3

3.5

4

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

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

1.5

2

2.5

3

3.5

4

Jul-16

Oct-16

Jan-17

Apr-17

Jul-17

Oct-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

Bid-to-Cover Ratio

Bid-to-Cover Ratios for TIPS

5-Year 10-Year (6-month moving average) Long-end (20- & 30-year)
33

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

Institutions, Individuals, Pension and Insurance.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Jun-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

13-week moving average

Percent Awarded in Bill Auctions by Investor Class 

(13-Week Moving Average)

Other Dealers and Brokers Investment Funds Foreign and International 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%

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

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
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%

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

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
36

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

Institutions, Individuals, Pension and Insurance.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Jun-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

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
37

Competitive Amount Awarded excludes SOMA add-ons. 

10%

20%

30%

40%

50%

60%

70%

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

% 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)
38

Competitive Amount Awarded excludes SOMA add-ons. 

0%

5%

10%

15%

20%

25%

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

% 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)
39

Foreign includes both private sector and official institutions.

0

20

40

60

80

100

120

140

160

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

Jan-21

Feb-21

Mar-21

Apr-21

May-21

Jun-21

$ bn

Total Foreign Awards of Treasuries at Auction, $ billions

Bills 2/3/5 7/10/20/30 TIPS FRN
40

Source: Treasury International Capital (TIC) System as of May 2021.

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

$ bn

Bills

Outstanding Foreign Holdings Foreign % (RHS)

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 2021

$ bn

Nominal Coupons, TIPS, and FRNs

Outstanding Foreign Holdings Foreign % (RHS)
Appendix

41
42

Projected Privately-Held Net Marketable Borrowing 

Assuming Private Coupon Issuance & Total Bills Outstanding 

Remain Constant as of 6/30/2021*

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 (754) 1,259 1,328 53 92 1,978 

2022 0 1,065 1,379 51 80 2,574 

2023 0 828 1,222 33 6 2,089 

2024 0 524 1,312 55 0 1,891 

2025 0 250 1,299 (11) 0 1,538 

2026 0 24 1,299 1 0 1,324 

2027 0 0 1,238 2 0 1,241 

2028 0 0 819 (16) 0 803 

2029 0 0 831 (11) 0 820 

2030 0 0 805 5 0 811 

2031 0 0 593 (12) 0 582 
43

*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 4/6/2021 0.015 3.19 38.8 49.0 6.8 44.2 1.2 3.1 0.4

4-Week 4/13/2021 0.010 3.72 38.7 55.0 10.6 34.4 1.3 3.1 0.4

4-Week 4/20/2021 0.010 3.64 38.9 45.5 6.4 48.2 1.1 3.3 0.4

4-Week 4/27/2021 0.005 3.73 38.6 41.4 4.6 54.0 1.4 2.7 0.4

4-Week 5/4/2021 0.000 3.75 38.3 39.5 6.4 54.2 1.7 3.3 0.4

4-Week 5/11/2021 0.010 3.48 39.3 49.0 4.8 46.2 0.7 3.2 0.4

4-Week 5/18/2021 0.000 4.17 38.8 44.0 3.8 52.2 1.2 3.2 0.4

4-Week 5/25/2021 0.000 3.98 39.3 52.6 9.0 38.4 0.7 2.7 0.4

4-Week 6/1/2021 0.000 4.06 39.4 53.8 3.1 43.1 0.6 3.2 0.4

4-Week 6/8/2021 0.000 3.73 39.3 31.5 1.2 67.3 0.7 3.1 0.4

4-Week 6/15/2021 0.005 3.16 39.3 54.3 6.5 39.2 0.7 3.3 0.4

4-Week 6/22/2021 0.045 3.48 38.8 54.8 3.3 42.0 1.2 2.7 0.4

4-Week 6/29/2021 0.045 3.24 39.3 47.8 9.1 43.1 0.7 3.2 0.4

8-Week 4/6/2021 0.015 3.62 39.3 41.5 4.4 54.0 0.7 3.1 0.7

8-Week 4/13/2021 0.010 3.71 39.4 44.2 7.9 47.9 0.6 3.1 0.7

8-Week 4/20/2021 0.015 2.99 39.2 70.8 11.5 17.7 0.8 3.3 0.7

8-Week 4/27/2021 0.015 3.14 39.5 48.4 10.5 41.1 0.5 2.7 0.7

8-Week 5/4/2021 0.010 3.40 38.9 43.8 6.6 49.6 1.1 3.3 0.7

8-Week 5/11/2021 0.010 3.59 39.7 53.1 3.9 43.0 0.3 3.2 0.7

8-Week 5/18/2021 0.010 3.47 39.7 67.7 9.8 22.5 0.3 3.2 0.7

8-Week 5/25/2021 0.005 3.38 39.6 66.1 7.8 26.1 0.4 2.7 0.7

8-Week 6/1/2021 0.005 3.23 39.8 62.6 11.7 25.7 0.2 3.2 0.7

8-Week 6/8/2021 0.015 2.97 39.3 63.8 9.3 26.9 0.7 3.1 0.7

8-Week 6/15/2021 0.020 2.89 39.4 59.4 9.3 31.3 0.6 3.3 0.7

8-Week 6/22/2021 0.035 3.92 39.3 30.0 1.0 68.9 0.7 2.7 0.7

8-Week 6/29/2021 0.050 3.60 39.8 39.3 4.4 56.2 0.2 3.2 0.7

Bills
44

*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 4/8/2021 0.020 3.00 56.1 32.7 4.7 62.5 0.9 7.5 1.7

13-Week 4/15/2021 0.020 3.02 55.7 53.1 6.5 40.3 1.3 6.2 1.7

13-Week 4/22/2021 0.025 2.64 56.2 52.3 7.2 40.5 0.8 6.7 1.7

13-Week 4/29/2021 0.020 2.99 55.4 47.7 6.2 46.1 1.6 6.1 1.7

13-Week 5/6/2021 0.015 3.05 55.5 42.1 8.0 49.9 1.5 7.9 1.7

13-Week 5/13/2021 0.015 2.72 56.1 47.6 9.1 43.3 0.9 6.0 1.7

13-Week 5/20/2021 0.015 2.94 55.5 47.9 9.7 42.4 1.5 7.1 1.7

13-Week 5/27/2021 0.015 2.88 56.3 49.4 8.0 42.6 0.8 5.3 1.7

13-Week 6/3/2021 0.020 2.74 55.5 53.2 15.2 31.6 1.5 7.6 1.8

13-Week 6/10/2021 0.025 2.79 55.6 46.6 8.7 44.6 1.4 4.9 1.7

13-Week 6/17/2021 0.025 3.45 55.8 31.5 4.1 64.4 1.2 5.6 1.7

13-Week 6/24/2021 0.045 3.62 56.3 39.0 6.8 54.2 0.7 2.1 1.6

13-Week 7/1/2021 0.050 3.62 56.6 40.1 9.0 50.9 0.4 7.9 1.8

26-Week 4/8/2021 0.035 3.38 53.0 31.3 3.8 64.9 1.0 7.1 3.3

26-Week 4/15/2021 0.040 3.39 53.1 39.7 4.1 56.2 0.9 5.9 3.2

26-Week 4/22/2021 0.040 3.23 53.3 41.4 2.9 55.7 0.7 6.4 3.3

26-Week 4/29/2021 0.035 3.32 52.5 37.3 2.7 60.0 1.5 5.8 3.2

26-Week 5/6/2021 0.035 2.72 53.2 62.8 5.8 31.4 0.8 7.5 3.3

26-Week 5/13/2021 0.035 3.28 53.4 32.4 3.4 64.2 0.6 5.7 3.2

26-Week 5/20/2021 0.030 3.28 53.1 41.6 5.7 52.7 0.9 6.8 3.3

26-Week 5/27/2021 0.030 2.78 52.5 56.3 7.4 36.4 1.5 5.0 3.2

26-Week 6/3/2021 0.035 3.10 52.6 43.0 14.1 42.8 1.4 7.2 3.3

26-Week 6/10/2021 0.040 3.31 53.1 41.9 3.8 54.4 0.9 4.6 3.2

26-Week 6/17/2021 0.040 3.32 53.1 37.9 6.4 55.7 0.9 5.3 3.2

26-Week 6/24/2021 0.055 3.64 53.5 28.1 5.2 66.7 0.5 2.0 3.1

26-Week 7/1/2021 0.055 3.60 53.5 33.0 1.6 65.4 0.5 7.5 3.3

52-Week 4/22/2021 0.065 3.69 33.8 46.8 2.8 50.4 0.2 4.0 4.1

52-Week 5/20/2021 0.055 3.32 33.8 57.4 6.9 35.7 0.2 4.3 4.2

52-Week 6/17/2021 0.070 3.19 33.8 62.6 5.5 31.9 0.2 3.3 4.1

Bills (cont.)
45

*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 4/8/2021 0.020 3.50 40.0 58.4 10.9 30.7 0.0 0.0 0.5

6-Week 4/15/2021 0.015 3.34 40.0 53.7 9.0 37.3 0.0 0.0 0.5

6-Week 4/22/2021 0.010 3.56 40.0 34.0 8.6 57.3 0.0 0.0 0.5

6-Week 4/29/2021 0.010 3.41 39.8 44.7 8.6 46.7 0.2 0.0 0.5

6-Week 5/6/2021 0.010 3.58 40.0 40.9 4.3 54.7 0.0 0.0 0.5

6-Week 5/13/2021 0.005 3.95 40.0 40.0 8.9 51.0 0.0 0.0 0.5

6-Week 5/20/2021 0.005 3.86 40.0 60.7 5.9 33.4 0.0 0.0 0.5

6-Week 5/27/2021 0.005 3.60 40.0 46.1 4.5 49.5 0.0 0.0 0.5

6-Week 6/3/2021 0.005 3.46 39.9 27.0 3.9 69.1 0.1 0.0 0.5

6-Week 6/10/2021 0.010 3.12 40.0 47.9 7.9 44.2 0.0 0.0 0.5

6-Week 6/17/2021 0.015 3.22 39.9 40.2 4.8 55.0 0.1 0.0 0.5

6-Week 6/24/2021 0.040 3.06 40.0 55.3 13.3 31.4 0.0 0.0 0.5

6-Week 7/1/2021 0.050 3.43 40.0 46.4 6.9 46.7 0.0 0.0 0.5

17-Week 4/13/2021 0.025 4.06 35.0 36.9 8.1 55.0 0.0 0.0 1.2

17-Week 4/20/2021 0.025 3.60 35.0 54.0 4.8 41.2 0.0 0.0 1.2

17-Week 4/27/2021 0.025 3.55 35.0 46.0 12.5 41.5 0.0 0.0 1.2

17-Week 5/4/2021 0.025 3.56 34.9 53.1 7.6 39.3 0.1 0.0 1.2

17-Week 5/11/2021 0.025 3.62 35.0 40.9 4.7 54.4 0.0 0.0 1.2

17-Week 5/18/2021 0.020 3.24 35.0 58.9 8.2 32.9 0.0 0.0 1.2

17-Week 5/25/2021 0.015 3.51 34.9 50.1 9.8 40.1 0.1 0.0 1.2

17-Week 6/1/2021 0.020 3.12 35.0 55.1 8.2 36.7 0.0 0.0 1.2

17-Week 6/8/2021 0.030 3.29 34.9 59.0 7.9 33.0 0.1 0.0 1.2

17-Week 6/15/2021 0.030 3.95 34.7 37.8 4.8 57.3 0.3 0.0 1.2

17-Week 6/22/2021 0.035 3.72 35.0 46.1 7.5 46.4 0.0 0.0 1.2

17-Week 6/29/2021 0.050 3.90 35.0 45.1 7.6 47.3 0.0 0.0 1.2

17-Week 7/6/2021 0.050 4.16 35.0 57.1 6.5 36.4 0.0 0.0 1.2

Bills (cont.)
46

*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 4/30/2021 0.175 2.34 59.7 37.9 18.5 43.6 0.3 11.5 15.5

2-Year 6/1/2021 0.152 2.74 59.8 24.9 18.0 57.1 0.2 11.6 15.6

2-Year 6/30/2021 0.249 2.54 59.9 30.9 18.5 50.6 0.1 9.1 15.2

3-Year 4/15/2021 0.376 2.32 57.7 33.1 15.8 51.1 0.3 8.9 21.6

3-Year 5/17/2021 0.329 2.42 57.9 32.3 18.1 49.6 0.1 30.8 28.9

3-Year 6/15/2021 0.325 2.47 58.0 27.6 18.3 54.2 0.0 5.3 20.7

5-Year 4/30/2021 0.849 2.31 60.9 24.6 17.5 57.9 0.1 11.6 38.7

5-Year 6/1/2021 0.788 2.49 60.9 20.8 14.9 64.4 0.1 11.8 38.9

5-Year 6/30/2021 0.904 2.36 61.0 24.3 18.1 57.6 0.0 9.3 37.7

7-Year 4/30/2021 1.306 2.31 62.0 22.3 20.6 57.1 0.0 11.8 53.7

7-Year 6/1/2021 1.285 2.41 62.0 19.7 20.7 59.6 0.0 12.0 54.0

7-Year 6/30/2021 1.264 2.36 62.0 18.7 21.3 60.0 0.0 9.4 52.5

10-Year 4/15/2021 1.680 2.36 38.0 24.2 16.2 59.6 0.0 5.8 43.8

10-Year 5/17/2021 1.684 2.45 41.0 19.5 17.1 63.4 0.0 21.8 63.0

10-Year 6/15/2021 1.497 2.58 38.0 15.7 19.2 65.0 0.0 3.5 41.4

20-Year 4/30/2021 2.144 2.42 24.0 21.1 20.2 58.7 0.0 4.6 50.5

20-Year 6/1/2021 2.286 2.24 27.0 23.8 19.5 56.7 0.0 5.2 56.1

20-Year 6/30/2021 2.120 2.40 24.0 17.5 20.4 62.1 0.0 3.6 48.4

30-Year 4/15/2021 2.320 2.47 24.0 17.1 21.9 61.0 0.0 3.7 66.6

30-Year 5/17/2021 2.395 2.22 27.0 20.1 20.1 59.9 0.0 14.3 96.4

30-Year 6/15/2021 2.172 2.29 24.0 18.0 18.0 64.0 0.0 2.2 61.7

2-Year FRN 4/30/2021 0.034 2.91 28.0 36.7 3.6 59.7 0.0 5.3 0.0

2-Year FRN 5/28/2021 0.030 3.03 26.0 39.5 1.3 59.2 0.0 0.0 0.0

2-Year FRN 6/25/2021 0.030 3.23 26.0 31.8 1.9 66.3 0.0 0.0 0.0

Nominal Coupons

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 4/30/2021 (1.631) 2.50 17.9 13.1 17.9 69.0 0.1 3.4 11.6

5-Year TIPS 6/30/2021 (1.416) 2.67 16.0 4.7 7.9 87.3 0.0 2.4 9.7

10-Year TIPS 5/28/2021 (0.805) 2.50 13.0 15.5 15.9 68.6 0.0 0.0 13.6

TIPS
1

Given your borrowing forecasts for the next two fiscal years, please comment on how 

Treasury should consider adjustments to coupon issuance sizes in the coming 

quarters. When should Treasury consider making adjustments to nominal coupon 

auction sizes, and how should these adjustments be allocated across the curve?

TBAC Charge

August 2021
2

Outline

1. Framework for Addressing TBAC Charge

2. Projection of Funding Needs

3. Coarse Auction Resizing Scenarios

4. Demand Assessment of Auction Points 

5. Fine Tuning Auction Adjustment Scenarios 

6. Additional Considerations

7. Conclusions and Recommendations

8. Appendix
1. Framework for Addressing TBAC Charge
4

Framework for Addressing TBAC Charge

• To address the questions of when and by how much Treasury should alter future coupon bond issuance a model has been 

used to estimate how overfunded Treasury would be under the current auction schedule and an assumed path of fiscal 

spending and SOMA management. This provides a baseline estimate of how much coupon issuance needs to be reduced. 

• When analyzing auction adjustments, we considered the following:

– The goal of maintaining regular and predictable issuance patterns while ensuring sufficient liquidity at existing nodes

o While the issuance tables shown throughout the analysis are in annual terms, the underlying auction 

adjustments were implemented in a monthly regular and predictable fashion (e.g., consistently reducing an 

auction point by $1 billion each month, beginning in the first month of the year, reduces annual issuance by 

$78 billion in the first year, and then $144 billion in future years)

– The goal to target T-bills within a long-term range of 15% to 20% of total debt outstanding 

– The impact on overall profile of the outstanding debt (WAM, duration and belly share*)

o Given the TBAC Optimal Debt Model’s preference for increasing belly share, we track this statistic throughout 

the analysis

– The relative cost of each issuance point and the expected overall cost of issuance

• We evaluated different issuance scenarios under consistent fiscal spending and SOMA management assumptions.

• The scenarios are intended to assist in the decision of when and how issuance should be reduced over the next several 

years, and more broadly, the debt issuance strategy going forward.

Assumptions for Addressing TBAC Charge

• The following assumptions have been made in each of the scenarios:

– The Fed’s net new purchases of Treasuries are assumed to decline linearly by $6.7 billion per month between 

January 2022 and December 2022, and reinvestment of maturing debt is continued over the projection horizon

– The fiscal spending requirements use the CBO budget projections (as of July 2021) with an adjustment of $1.5 trillion 

for additional fiscal packages not included in that baseline

– Unless otherwise stated, SOMA holdings are included within the measures of the outstanding Treasury debt

o For the purposes of calculating duration and WAM, SOMA holdings are treated as FRNs with the same 

maturities

– 2-year FRN issuance is held constant at current levels

– Treasury General Account (TGA) is held constant at current levels throughout the projection period

– T-bills are issued as needed to meet the overall funding requirements in each coupon auction scenario

* Note: Belly share is defined as the % of outstanding debt with remaining maturity greater than 1 year and less than 8.5 years.
2. Projection of Funding Needs
6

$0 Bn

$500 Bn

$1,000 Bn

$1,500 Bn

$2,000 Bn

$2,500 Bn

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031

Federal Borrowing Requirements are Expected to Remain Large in 

Coming Years

• While Federal government borrowing needs are projected to decline as the economy recovers from the impact of the 

global pandemic over the next few years, they nonetheless are expected to remain quite large in historical terms.

• We assume additional fiscal packages are likely to be passed this year, resulting in additional aggregate net federal 

spending of $1.5 trillion through 2030 (over the next 9 years*). This would further add to Treasury’s financing 

requirements in coming years.

Federal Government Net Borrowing Needs (Fiscal Year)

As of June 30, 2021

USD, Billions Percent of GDP

Source: CBO and committee participant. * Based on committee participant's estimates.

■ CBO Projection (July 2021)

■ Additional Fiscal Spending*

■ Projected Fed Purchases of Treasuries*

0%

2%

4%

6%

8%

10%

2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031

■ CBO Projection (July 2021)

■ Additional Fiscal Spending*

■ Projected Fed Purchases of Treasuries*
3. Coarse Auction Resizing Scenarios
8

Scenario 1—Maintain Current Auction Schedule

• This scenario holds coupon issuance constant based on the 

most recent actual quarterly issuance cycle (May - July) totals.

• Under this scenario, Treasury will be significantly overfunded, 

the T-bill share will drop well outside the target range and the 

WAM and WAD will both extend longer

– In this scenario T-bill share falls to approximately 2% in 

2026-2027, a clearly unacceptable outcome

• TIPS share gradually declines as a percent of outstanding debt

Projected % of Total Outstanding Debt

Assumed Annual Issuance Schedule ($bn)

%

0%

10%

20%

30%

40%

50%

60%

Target Range for Bills Bill Share

TIPS Share Belly Share*

FRN Share

Calendar

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

TIPS

10Y 

TIPS

30Y 

TIPS

2022 720 696 732 744 468 300 300 68 88 18

2023 720 696 732 744 468 300 300 68 88 18

2024 720 696 732 744 468 300 300 68 88 18

2025 720 696 732 744 468 300 300 68 88 18

2026 720 696 732 744 468 300 300 68 88 18

2027 720 696 732 744 468 300 300 68 88 18

2028 720 696 732 744 468 300 300 68 88 18

2029 720 696 732 744 468 300 300 68 88 18

2030 720 696 732 744 468 300 300 68 88 18

2031 720 696 732 744 468 300 300 68 88 18

Source: Committee participant. * Note: Belly share is defined as the % of outstanding debt with remaining maturity greater than 1 year and less than 8.5 years. 

Projected WAD and WAM (years)

Years

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

Duration

SOMA Adjusted Duration

WAM
9

Scenario 2—Reduce Nominal Coupon Auction Sizes Pro-Rata

• This scenario is designed to serve as our initial baseline, incorporating 

the goal of maintaining T-bill share within the target range

• Nominal coupon auctions are reduced by 35% over the next 12 months 

to maintain T-bill share within the target range. Given current fiscal 

projections, nominal coupons would need to gradually increase 

beginning in 2025 to fund increasing deficits

• After these cuts, auction sizes will be largely in line with pre-COVID 

levels, with the exception of the 20-year which was re-introduced in 

May 2020 and accounts for nearly all of the aggregate increase in 

nominal coupons

• TIPS issuance is gradually increased to approximately 8%-9% share 

over the scenario horizon

• This scenario increases the WAM/duration profile over the projection 

horizon, although less so than in Scenario 1

Calendar

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

TIPS

10Y 

TIPS

30Y 

TIPS

Current 720 696 732 744 468 300 300 68 88 18

2022 585 564 593 603 380 243 243 80 97 20

2023 468 456 480 480 308 200 200 92 109 22

2024 468 456 480 480 308 200 200 104 121 24

2025 489 471 495 504 318 204 204 116 133 26

2026 546 525 552 562 352 226 226 116 133 26

2027 576 552 588 600 372 240 240 116 133 26

2028 618 594 624 636 401 256 256 116 133 26

2029 669 645 678 690 434 280 280 116 133 26

2030 705 681 714 726 458 294 294 116 133 26

2031 720 696 732 744 468 300 300 116 133 26

0%

10%

20%

30%

40%

50%

60%

Target Range for Bills Bill Share

TIPS Share Belly Share*

FRN Share

Source: Committee participant. * Note: Belly share is defined as the % of outstanding debt with remaining maturity greater than 1 year and less than 8.5 years.

Assumed Annual Issuance Schedule ($bn)

Projected % of Total Outstanding Debt % Projected WAD and WAM (years) Years

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0 Duration

SOMA Adjusted Duration

WAM
10

Scenario 2 ALT—Reduce Nominal Coupon Auction Sizes by a Smaller 

Pro-Rata Amount

• This alternative scenario allows T-bill share to drop outside 

the target range in order to keep nominal coupon auctions 

more stable over the horizon

• Nominal coupon auctions are reduced by 25% over the next 

12 months and are then increased beginning in 2027

• Like Scenario 2, TIPS issuance is gradually increased to 

approximately 8%-9% share over the scenario horizon

• Relative to Scenario 2, this scenario has a lower T-bill share 

and a longer WAM/Duration in the early/middle years of the 

scenario horizon

Calendar

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

TIPS

10Y 

TIPS

30Y 

TIPS

Current 720 696 732 744 468 300 300 68 88 18

2022 624 603 633 644 405 262 262 80 97 20

2023 540 528 552 564 356 224 224 92 109 22

2024 540 528 552 564 356 224 224 104 121 24

2025 540 528 552 564 356 224 224 116 133 26

2026 540 528 552 564 356 224 224 116 133 26

2027 561 540 570 579 364 232 232 116 133 26

2028 597 576 606 615 388 249 249 116 133 26

2029 633 611 642 653 410 264 264 116 133 26

2030 669 645 678 690 434 280 280 116 133 26

2031 705 681 714 726 458 294 294 116 133 26

0%

10%

20%

30%

40%

50%

60%

Target Range for Bills Bill Share

TIPS Share Belly Share*

FRN Share

Source: Committee participant. * Note: Belly share is defined as the % of outstanding debt with remaining maturity greater than 1 year and less than 8.5 years.

Assumed Annual Issuance Schedule ($bn)

Projected % of Total Outstanding Debt

%

Projected WAD and WAM (years)

Years

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0 Duration

SOMA Adjusted Duration

WAM
4. Demand Assessment of Auction Points 
12

Framework for Assessing Relative Demand Across Auction Points

• Within a regular and predictable framework, Treasury may reduce its funding cost by adjusting issuance at curve points 

based on perceived relative demand. 

– Relative value measures are one method to gauge relative demand among auction points.

– A key question is whether these relative demand indicators are transitory or persistent.

• The most liquid on-the-runs tend to trade at a greater liquidity premium and therefore Treasury can benefit by issuing a 

greater proportion of these highly liquid securities.

• In this section different relative cost measures will be used to identify the most highly sought after and attractive points for

Treasury issuance.

– First, a model independent method of measuring relative cost is employed using swap spreads.

– Second, a committee participant term structure model is used to fit a fair value curve and relative cost is measured to 

that fair value curve. This second approach produces results consistent with the swap spread analysis.

– A market repo analysis and a comparison of secondary trading volume with issuance are also presented to 

complement these relative cost analyses.

– We focused our analysis on comparing 7s and 20s against butterflies of 5s, 10s and 30s.

• Finally, a committee participant term structure model is used to assess demand differences across auction points broadly.
13

Assessing Relative Demand Using Swap Spreads

• Swap spreads can provide a model independent method of identifying relative cost of specific auction points.

• Duration neutral butterflies of swap spreads indicate that:

– On-the-run 7s have generally been cheap vs. a butterfly of on-the-run 5s and on-the-run 10s.

– On-the-run 20s have generally been cheap vs. a butterfly of on-the-run 10s and on-the-run 30s.

Note: Re-introduced 7-year auctions in February 2009. 

Re-introduced 20-year auctions in May 2020. 

Swap spread is defined as on-the-run treasury yield minus corresponding LIBOR swap rate.

Source: Bloomberg and committee participant.

7s vs. 5s/10s Butterfly Swap Spread

As of June 30, 2021

20s vs. 10s/30s Butterfly Swap Spread

Bps Bps As of June 30, 2021

-15

-10

-5

0

5

10

15

20

-15

-10

-5

0

5

10

15

20

Average:

3.5 bps

Average:

2.9 bps
14

-45

-40

-35

-30

-25

-20

-15

-10

-5

0

5

10

5s 7s 10s 20s 30s

Assessing Relative Demand Using Fitted Treasury Yield Curve

• Committee participant fitted yield curve provides an estimate of the relative cost of specific auction points1.

• The relative cost estimate of each on-the-run Treasury is shown below:

Source: Committee participant model. 1 Presenting members model used for fitted Treasury yield is a proprietary stochastic term structure model which fits fair value for off the run 

Treasury bonds and bond volatility.

5s 7s 10s 20s 30s

Average Since 2/27/1998 -7.0 N/A -13.7 N/A -10.4

Average Since 2/26/2009 -5.2 -2.7 -7.2 N/A -1.7

Average Since 5/20/2020 -4.1 -2.0 -6.7 -2.3 -4.7

252 Day Rolling Spreads to Committee Participant Yield Curve Fit

of On-the-Run Treasuries 

As of June 30, 2021

Bps

Average Spreads of On-the-Run Treasuries to Committee Participant Yield Curve Fit (Bps)

As of June 30, 2021

Note: Re-introduced 7-year auctions in February 2009. 

Re-introduced 20-year auctions in May 2020. 
15

-15

-10

-5

0

5

10

15

20

Butterfly Spread to Model Fitted Yield

Butterfly Swap Spread

-15

-10

-5

0

5

10

15

20 Butterfly Spread to Model Fitted Yield

Butterfly Swap Spread

Assessing Relative Demand Using Fitted Treasury Yield Curve

• Duration neutral butterflies of these fitted yield deviations support the findings from the swap spread butterfly analysis:

– On-the-run 7s have generally been cheap vs. a butterfly of on-the-run 5s and on-the-run 10s.

– On-the-run 20s have generally been cheap vs. a butterfly of on-the-run 10s and on-the-run 30s.

7s vs. 5s/10s Butterfly 

As of June 30, 2021

20s vs. 10s/30s Butterfly

As of June 30, 2021

Average:

3.3 bps

3.5 bps

Average:

2.9 bps

3.3 bps

Note: Re-introduced 7-year auctions in February 2009. 

Re-introduced 20-year auctions in May 2020. 

Swap spread is defined as on-the-run treasury yield minus corresponding LIBOR swap rate.

Source: Bloomberg and committee participant.

Bps Bps
16

 (3.00)

 (2.50)

 (2.00)

 (1.50)

 (1.00)

 (0.50)

 -

 5yr 7yr 10yr 20yr 30yr

Assessing Market Demand Using Repo Rate Analysis

• On-the-run Treasury specialness is defined as the difference in financing costs to repo on-the-run Treasuries and off-the-run 

Treasuries.

• While explaining only a portion of the fitted yields, this provides additional support for the relative cost of on-the-run Treasuries.

Source: Bloomberg, JPMorgan Markets. * Cumulative repo richness includes the repo richness of on-the-run until it becomes the 4th old.

5s 7s 10s 20s 30s

Average Since 1/1/2010 (0.87) (0.34) (1.44) -- (0.43)

Average Since 5/20/2020 (0.45) (0.22) (1.23) (0.05) (0.30)

252 Day Rolling Average of Yield Value of the Cumulative Repo

Richness of On-The-Run Treasuries*

Yield, Bps As of June 30, 2021

Yield Value of the Cumulative Repo Richness of On-The-Run Treasuries* (Price Yield, Bps) 

As of June 30, 2021

Note: Re-introduced 20-year auctions in May 2020. 
17

Assessing Market Demand Using Trading Volumes Relative to 

Auction Size

Treasury 

Volume

Treasury 

Issuance 

Trading $ / 

Issuance $*

2s 13% 17% 16.63 

3s 12% 17% 16.89 

5s 29% 18% 36.83 

7s 10% 18% 13.24 

10s 26% 11% 52.10 

> 10Y 8% 15% 12.47 

TIPS 2% 4% 13.52 

Trading Volumes and Issuance 

January 1, 2020 – June 30, 2021

Source: FINRA and TRACE. *Annualized Treasury on-the-run trading volume divided by annualized issuance volume.

Treasury 

Volume

Treasury 

Issuance

Trading $ / 

Issuance $*

2s 11% 17% 16.12 

3s 13% 17% 19.69 

5s 28% 18% 38.53 

7s 10% 18% 13.95 

10s 25% 11% 54.53 

20s 3% 7% 11.65 

30s 7% 7% 23.09 

TIPS 3% 4% 15.36 

Trading Volumes and Issuance 

May and June 2021

• Secondary Treasury trading volumes relative to issuance size are much higher in 5s and 10s than other nodes.

• Over the past 18 months, 54% of on-the-run Treasury trading volume has been in 5s and 10s, despite representing only 29% of 

the issuance.

• These are the most liquid points on the Treasury curve and this is likely due to MBS and corporate bond hedging activity.

• 30-year trading volume is more than double 20-year trading volume despite equal issuance amounts. Furthermore, 30-year onthe-run volume understates the liquidity demands at the 30-year point because 30-year corporates are priced/hedged using the 

once old 30-year.

• Investors are willing to accept a lower yield for these more liquid securities.

• This suggests there is capacity for Treasury to consider issuing a greater proportion in 5s, 10s and 30s and benefit more from the 

richness of these points.

Notes on Data Provided:

• FINRA has provided trading volume statistics for 20-year on the runs since May 2021.

• Since this period is so short, we compare the trading volumes of the prior 18 months to show that May and June 2021 period is representative 

of the longer period.
18

Assessing Relative Demand Across Broad Yield Curve Segments*

0

20

40

60

80

100

120

140

160

180

200

-150

-100

-50

0

50

100

150

200

2s 3s

5s 10s

30s

Spread of Swap Curve to Treasury Curve

As of June 30, 2021

Bps

2s 3s 5s 10s 30s

Average From 2/27/1998 to 12/31/2007 48 50 49 45 40

Average From 1/1/2009 to 6/30/2021 21 17 9 -5 -27

Average Spread of Swap Curve to Treasury Curve (Bps) 

As of June 30, 2021

Source: Committee participant model. * For a more in-depth discussion, see previous TBAC charge from February 2021.

• Committee participant fitted Treasury and fitted Swap yield curves are compared to assess demand differences across 

the yield curve broadly.

• Before the global financial crisis, Treasuries consistently traded at lower yields than Swaps across the entire yield curve.

– Swap spreads were generally flat across the term structure.

• Since then, Swap spreads have been significantly lower.

– The Treasury curve has been persistently steeper than the Swap curve.
5. Fine Tuning Auction Adjustment Scenarios 
20

Scenario 3—Relative Market Demand Adjustments

• Given the preceding relative market demand analysis, this 

scenario further reduces the 7 and 20-year auctions relative to 

Scenario 2. For illustrative purposes, 7-year auctions are 

reduced by approximately $100bn and 20-year auctions are 

reduced by approximately $50bn, annually

• Offsetting increases are made to the 5, 10 and 30-year 

auctions using a par weighted butterfly approach 

• We reduced the 20-year auction by a smaller amount to ensure 

sufficient liquidity at the 20-year point

• This method has little impact on WAM/duration profile, as well 

as belly share and T-bill share of the outstanding debt, relative 

to Scenario 2, while likely achieving a lower cost of issuance 

Calendar

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

TIPS

10Y 

TIPS

30Y 

TIPS

Current 720 696 732 744 468 300 300 68 88 18

2022 585 564 619 549 422 217 257 80 97 20

2023 468 456 528 384 380 152 224 92 109 22

2024 468 456 528 384 380 152 224 104 121 24

2025 489 471 543 408 390 156 228 116 133 26

2026 546 525 600 466 424 178 250 116 133 26

2027 576 552 636 504 444 192 264 116 133 26

2028 618 594 672 540 473 208 280 116 133 26

2029 669 645 726 594 506 232 304 116 133 26

2030 705 681 762 630 530 246 318 116 133 26

2031 720 696 780 648 540 252 324 116 133 26

0%

10%

20%

30%

40%

50%

60%

Target Range for Bills Bill Share

TIPS Share Belly Share*

FRN Share

Source: Committee participant. * Note: Belly share is defined as the % of outstanding debt with remaining maturity greater than 1 year and less than 8.5 years.

Assumed Annual Issuance Schedule ($bn)

% Projected % of Total Outstanding Debt Years Projected WAD and WAM (years)

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

Duration

SOMA Adjusted Duration

WAM
21

Scenario 4—Increase the Belly Share

• This scenario increases the belly share of the debt, as 

favored by the TBAC Optimal Debt Model, while making an 

offsetting decrease of long end issuance

• For illustrative purposes, in this scenario we modify Scenario 

3 to reallocate approximately $100bn of issuance from 10s, 

20s and 30s to 2s, 3s, 5s and 7s

• This scenario results in a decrease in the WAM/duration 

profile relative to Scenarios 2 and 3, while also potentially 

reducing term premia costs

0%

10%

20%

30%

40%

50%

60%

Target Range for Bills Bill Share

TIPS Share Belly Share*

FRN Share

Calendar

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

TIPS

10Y 

TIPS

30Y 

TIPS

Current 720 696 732 744 468 300 300 68 88 18

2022 599 578 634 562 396 205 242 80 97 20

2023 492 480 552 408 332 128 200 92 109 22

2024 492 480 552 408 332 128 200 104 121 24

2025 513 495 567 432 342 132 204 116 133 26

2026 570 549 624 490 376 154 226 116 133 26

2027 600 576 660 528 396 168 240 116 133 26

2028 642 618 696 564 425 184 256 116 133 26

2029 693 669 750 618 458 208 280 116 133 26

2030 729 705 786 654 482 222 294 116 133 26

2031 744 720 804 672 492 228 300 116 133 26

Source: Committee participant. * Note: Belly share is defined as the % of outstanding debt with remaining maturity greater than 1 year and less than 8.5 years.

Assumed Annual Issuance Schedule ($bn)

Projected % of Total Outstanding Debt

%

Projected WAD and WAM (years)

Years

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

Duration

SOMA Adjusted Duration

WAM
22

Scenario 5—Decrease the Belly Share

• This scenario decreases the belly share of the debt, to 

reduce the uncertainty of interest costs in future budgets, 

while making an offsetting increase of long end issuance

• For illustrative purposes, in this scenario we modify Scenario 

3 to reallocate approximately $100bn of issuance from 2s, 3s, 

5s and 7s to 10s, 20s and 30s

• This scenario results in an increase in the WAM/duration 

profile relative to Scenarios 2 and 3, although it potentially 

increases term premia costs

0%

10%

20%

30%

40%

50%

60% Target Range for Bills Bill Share

TIPS Share Belly Share*

FRN Share

Calendar

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

TIPS

10Y 

TIPS

30Y 

TIPS

Current 720 696 732 744 468 300 300 68 88 18

2022 571 550 604 536 448 229 272 80 97 20

2023 444 432 504 360 428 176 248 92 109 22

2024 444 432 504 360 428 176 248 104 121 24

2025 465 447 519 384 438 180 252 116 133 26

2026 522 501 576 442 472 202 274 116 133 26

2027 552 528 612 480 492 216 288 116 133 26

2028 594 570 648 516 521 232 304 116 133 26

2029 645 621 702 570 554 256 328 116 133 26

2030 681 657 738 606 578 270 342 116 133 26

2031 696 672 756 624 588 276 348 116 133 26

Source: Committee participant. * Note: Belly share is defined as the % of outstanding debt with remaining maturity greater than 1 year and less than 8.5 years.

Assumed Annual Issuance Schedule ($bn)

Projected % of Total Outstanding Debt

%

Projected WAD and WAM (years)

Years

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0 Duration

SOMA Adjusted Duration

WAM
23

0

5

10

15

20

25

Jun-21 Jun-24 Jun-27 Jun-30

Scenario 1 Scenario 2

Scenario 3 Scenario 4

Scenario 5

0

1

2

3

4

5

6

7

8

Jun-21 Jun-24 Jun-27 Jun-30

Scenario 1 Scenario 2

Scenario 3 Scenario 4

Scenario 5

Summary of Scenarios

As of June 30, 2021. Source: Committee participant. Belly share is defined as the % of outstanding debt with remaining maturity greater than 1 year and less than 8.5 years. * Where Scenario

2 is not visible, it is being hidden by the Scenario 3 line.

T-Bill Share 

Scenario 1

▬

Flat issuance

Scenario 2*

▬

35% Pro-rata cut

(with issuance gradually 

increasing starting in 2025)

Scenario 3

▬

Scenario 2 +

RV adjustment

Scenario 4

▬

Scenario 3 +

Increased belly share

Scenario 5

▬

Scenario 3 +

Decreased belly share

% Belly Share 

Years Duration

Years WAM

Years SOMA Adjusted Duration

% $, Trillions T-Bills Outstanding

▬Target Range

for T-Bills

35

40

45

50

55

Jun-21 Jun-24 Jun-27 Jun-30

Scenario 1 Scenario 2

Scenario 3 Scenario 4

Scenario 5

4.5

5.0

5.5

6.0

6.5

Jun-21 Jun-24 Jun-27 Jun-30

Scenario 1 Scenario 2

Scenario 3 Scenario 4

Scenario 5

3.0

3.5

4.0

4.5

5.0

Jun-21 Jun-24 Jun-27 Jun-30

Scenario 1 Scenario 2

Scenario 3 Scenario 4

Scenario 5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

Jun-21 Jun-24 Jun-27 Jun-30

Scenario 1 Scenario 2 Scenario 3

Scenario 4 Scenario 5
6. Additional Considerations
25

Other Considerations 

• Treasury is faced with a number of significant uncertainties and must continue to maintain a flexible approach.

– Major fiscal policy initiatives can significantly alter the future path of fiscal deficits, creating uncertainty around 

Treasury funding requirements; examples include fiscal packages currently under discussion as well as potential 

extensions of household tax cuts when they expire at the end of 2025.

– Differences between actual and CBO's projected paths of real GDP can be expected to result in unanticipated 

changes in Treasury's funding needs.

– In addition, given elevated levels of debt/GDP, interest rate volatility also introduces greater uncertainty looking 

forward.

– Finally, the Federal Reserve's balance sheet policies over time add additional uncertainty to Treasury's future 

funding needs.

• Treasury’s implementation of its regular and predictable philosophy should consider both uncertain funding requirements 

and the need to maintain sufficient outstanding supply of T-bills.
7. Conclusions and Recommendations
27

Conclusions and Recommendations

• The current auction schedule would likely leave Treasury significantly overfunded.

• Issuance will need to be cut in coming years to maintain a reasonable share of T-bills.

• Choosing between Scenario 2 and Scenario 2-ALT is a trade-off between maintaining T-bill share within the target range 

and keeping nominal coupon auctions more stable over time.

– Scenario 2 maintains more stability in the share of T-bills and adjusts coupons gradually over a one year time 

frame. This approach recognizes the significant fiscal uncertainty Treasury faces and the historically large 

current size of coupon auctions.

– The presenting member favors initially sizing coupon reductions consistent with Scenario 2-ALT, thereby leaving 

flexibility for further reductions later if needed.

• The presenting member recommends a reduction in 7 and 20-year issuance, with offsetting adjustments to 5, 10 and 30-

year auctions as illustrated in Scenario 3. We recommend that Treasury make these adjustments gradually over time 

while observing market feedback and adhering to regular and predictable principles.

• Choosing between Scenarios 4 and 5 is a trade-off between potentially increasing term premia costs and the uncertainty 

of interest costs in future budgets.

– The TBAC optimal debt model favors increasing belly share and, therefore, would tend to favor Scenario 4.

– Given all the elements of uncertainty that Treasury faces, the presenting member favors the adjustments implied 

in Scenario 5 to reduce the uncertainty of interest costs in future budgets.

• The scenarios presented are illustrative and meant to convey both a guiding framework and a general direction for 

auction adjustments.

– We recommend that Treasury consider implementing near term auction changes with an eye on long term debt 

dynamics (T-bill share, belly share, WAM, and duration).

– While more distant years are of course more uncertain, looking at these long-term projections can provide 

insights into how debt characteristics may evolve over time.

• In practice, when implementing specific auction adjustments, Treasury should consider both changing fiscal dynamics 

and market factors, while keeping changes gradual, well telegraphed, and in keeping with regular and predictable 

principles.
8. Appendix
29

Summary—Change in Gross Issuance from Scenario 1 (in $bn) 

Calendar 

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

10Y 

TIPS

30Y 

TIPS

2022 -135 -132 -139 -141 -88 -57 -57 12 9 2

2023 -252 -240 -252 -264 -160 -100 -100 24 21 4

2024 -252 -240 -252 -264 -160 -100 -100 36 33 6

2025 -231 -225 -237 -240 -150 -96 -96 48 45 8

2026 -174 -171 -180 -182 -116 -74 -74 48 45 8

2027 -144 -144 -144 -144 -96 -60 -60 48 45 8

2028 -102 -102 -108 -108 -67 -44 -44 48 45 8

2029 -51 -51 -54 -54 -34 -20 -20 48 45 8

2030 -15 -15 -18 -18 -10 -6 -6 48 45 8

2031 0 0 0 0 0 0 0 48 45 8

Scenario 2 ($bn)

Calendar 

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

10Y 

TIPS

30Y 

TIPS

2022 -135 -132 -113 -195 -46 -83 -43 12 9 2

2023 -252 -240 -204 -360 -88 -148 -76 24 21 4

2024 -252 -240 -204 -360 -88 -148 -76 36 33 6

2025 -231 -225 -189 -336 -78 -144 -72 48 45 8

2026 -174 -171 -132 -278 -44 -122 -50 48 45 8

2027 -144 -144 -96 -240 -24 -108 -36 48 45 8

2028 -102 -102 -60 -204 5 -92 -20 48 45 8

2029 -51 -51 -6 -150 38 -68 4 48 45 8

2030 -15 -15 30 -114 62 -54 18 48 45 8

2031 0 0 48 -96 72 -48 24 48 45 8

Scenario 3 ($bn)

Calendar 

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

10Y 

TIPS

30Y 

TIPS

2022 -121 -118 -98 -182 -72 -95 -58 12 9 2

2023 -228 -216 -180 -336 -136 -172 -100 24 21 4

2024 -228 -216 -180 -336 -136 -172 -100 36 33 6

2025 -207 -201 -165 -312 -126 -168 -96 48 45 8

2026 -150 -147 -108 -254 -92 -146 -74 48 45 8

2027 -120 -120 -72 -216 -72 -132 -60 48 45 8

2028 -78 -78 -36 -180 -43 -116 -44 48 45 8

2029 -27 -27 18 -126 -10 -92 -20 48 45 8

2030 9 9 54 -90 14 -78 -6 48 45 8

2031 24 24 72 -72 24 -72 0 48 45 8

Calendar 

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

10Y 

TIPS

30Y 

TIPS

2022 -149 -146 -128 -208 -20 -71 -28 12 9 2

2023 -276 -264 -228 -384 -40 -124 -52 24 21 4

2024 -276 -264 -228 -384 -40 -124 -52 36 33 6

2025 -255 -249 -213 -360 -30 -120 -48 48 45 8

2026 -198 -195 -156 -302 4 -98 -26 48 45 8

2027 -168 -168 -120 -264 24 -84 -12 48 45 8

2028 -126 -126 -84 -228 53 -68 4 48 45 8

2029 -75 -75 -30 -174 86 -44 28 48 45 8

2030 -39 -39 6 -138 110 -30 42 48 45 8

2031 -24 -24 24 -120 120 -24 48 48 45 8

Scenario 4 ($bn) Scenario 5 ($bn)
30

Summary—Change in Gross Issuance from Scenario 1 (in %)

Calendar 

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

10Y 

TIPS

30Y 

TIPS

2022 -19 -19 -19 -19 -19 -19 -19 18 10 11

2023 -35 -34 -34 -35 -34 -33 -33 35 24 22

2024 -35 -34 -34 -35 -34 -33 -33 53 38 33

2025 -32 -32 -32 -32 -32 -32 -32 71 51 44

2026 -24 -25 -25 -24 -25 -25 -25 71 51 44

2027 -20 -21 -20 -19 -21 -20 -20 71 51 44

2028 -14 -15 -15 -15 -14 -15 -15 71 51 44

2029 -7 -7 -7 -7 -7 -7 -7 71 51 44

2030 -2 -2 -2 -2 -2 -2 -2 71 51 44

2031 0 0 0 0 0 0 0 71 51 44

Scenario 2 (%)

Calendar 

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

10Y 

TIPS

30Y 

TIPS

2022 -19 -19 -15 -26 -10 -28 -14 18 10 11

2023 -35 -34 -28 -48 -19 -49 -25 35 24 22

2024 -35 -34 -28 -48 -19 -49 -25 53 38 33

2025 -32 -32 -26 -45 -17 -48 -24 71 51 44

2026 -24 -25 -18 -37 -9 -41 -17 71 51 44

2027 -20 -21 -13 -32 -5 -36 -12 71 51 44

2028 -14 -15 -8 -27 1 -31 -7 71 51 44

2029 -7 -7 -1 -20 8 -23 1 71 51 44

2030 -2 -2 4 -15 13 -18 6 71 51 44

2031 0 0 7 -13 15 -16 8 71 51 44

Scenario 3 (%)

Calendar 

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

10Y 

TIPS

30Y 

TIPS

2022 -17 -17 -13 -24 -15 -32 -19 18 10 11

2023 -32 -31 -25 -45 -29 -57 -33 35 24 22

2024 -32 -31 -25 -45 -29 -57 -33 53 38 33

2025 -29 -29 -23 -42 -27 -56 -32 71 51 44

2026 -21 -21 -15 -34 -20 -49 -25 71 51 44

2027 -17 -17 -10 -29 -15 -44 -20 71 51 44

2028 -11 -11 -5 -24 -9 -39 -15 71 51 44

2029 -4 -4 2 -17 -2 -31 -7 71 51 44

2030 1 1 7 -12 3 -26 -2 71 51 44

2031 3 3 10 -10 5 -24 0 71 51 44

Calendar 

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

10Y 

TIPS

30Y 

TIPS

2022 -21 -21 -17 -28 -4 -24 -9 18 10 11

2023 -38 -38 -31 -52 -9 -41 -17 35 24 22

2024 -38 -38 -31 -52 -9 -41 -17 53 38 33

2025 -35 -36 -29 -48 -6 -40 -16 71 51 44

2026 -28 -28 -21 -41 1 -33 -9 71 51 44

2027 -23 -24 -16 -35 5 -28 -4 71 51 44

2028 -18 -18 -11 -31 11 -23 1 71 51 44

2029 -10 -11 -4 -23 18 -15 9 71 51 44

2030 -5 -6 1 -19 24 -10 14 71 51 44

2031 -3 -3 3 -16 26 -8 16 71 51 44

Scenario 4 (%) Scenario 5 (%)
Proposals to reduce prime MMFs vulnerabilities 

August 2021

A recent President’s Working Group on Financial Markets (PWG) report on money market fund (MMF) reform described 10 potential

regulatory options to address existing vulnerabilities in the sector given the events of March 2020. 

1. Please discuss the primary drivers of the stress experienced by MMFs in March 2020, as well as any other inherent vulnerabilities that 

currently exist in the MMF sector. 

2. How would the specific reform proposals presented in the PWG report be expected to impact the MMF industry and broader shortterm funding markets, including the front-end of the Treasury market and Treasury repo, both under normal market conditions and 

during future episodes of market stress? 
1

Executive Summary

Drivers of stress experienced by prime Money Market Funds (MMFs)

• Events of March 2020 show that despite significant reforms, prime MMFs still suffer from vulnerabilities in times of market stress 

• Fees and gates have added a fundamental first-mover advantage for pre-emptive redemptions in times of stress. In addition, the 

Weekly Liquid Asset (WLA) requirement accentuates a reluctance to dip into Treasuries to fund redemptions 

• Limited secondary market intermediation in credit products also puts prime MMF vulnerabilities in greater focus

• Another component of vulnerability is the significant dispersion among prime MMFs. Smaller sized funds have lesser allocation to

Treasuries, lower WLA and show greater propensity for bar-belling portfolios 

• Redemptions that start at prime MMFs with riskier asset allocation can become industry wide episodes

President’s Working Group on Financial Markets’ proposal evaluation

• Listed proposals range from modest to those requiring aggressive changes

• Changes to prime MMFs should effectively balance the tradeoffs between attractiveness of yields in normal times and resilience in times 

of stress 

• Proposals that strike the best balance, in our opinion, are:

• Weaken link between regulatory thresholds and gates/fees - Provide greater flexibility to tap liquid assets to meet redemptions

• Reform conditions for imposing redemption gates - Reduce incentive for investors to pre-emptively redeem

• Changes to liquidity management requirement - Increase liquidity profile through additional categories like biweekly liquid assets

• Floating NAV for all Prime and Tax-exempt MMFs – Improve transparency and set clearer expectations of fund risks for investors 

Other potential reforms for consideration

1. Given large variation in prime MMF profiles, proposals that seek to reduce dispersion in Treasury holdings and WLA between various 

funds would be a positive step 

• This would reduce odds of lower WLA funds being the focus of investors looking to benefit from first-mover advantage, and 

• Promote standardization in the industry benefiting investors

2. Prime MMFs have required multiple backstops while not offering investors much net yield pickup over government MMFs. Should 

regulators take steps to minimize or eliminate prime MMFs?
2

Primary drivers of stress experienced by prime MMFs
3

Prime MMFs remain susceptible to redemption pressures

Prime MMFs experienced greater redemption, as % of assets, in March 

2020 than in 2008 • Prime MMFs remain susceptible to redemption 

pressures in times of stress. In Mar’20, prime MMFs 

lost 12% of assets, which was greater than in 2008

• Prime funds assets have shrunk significantly post 2014 

reform and stand at ~$900bn in Jun’21, compared 

with $1.6trn pre-reform

• Prime inst’l funds are estimated to be ~$650bn with 

roughly 60% in non-public internal cash management 

funds

• In periods of stress, redemptions from prime MMFs 

correspond with roughly equal inflows into 

government MMFs

• For example, ICI data show that $186bn 

outflow in 4wk period in September 2008 

coincided with $260bn inflow into government 

MMFs

• Likewise, $145bn outflow from prime funds in 

November 2015 coincided with $180bn inflow 

into government MMFs. Same experience was 

repeated in October 2016 (MMF reform)

• From Treasury’s perspective, this translates into 

additional demand for short-term Treasuries as 

government MMFs hold ~60% of assets in 

Treasuries, compared with 18% at prime MMFs

Source: ICI

Prime MMFs are now a significantly smaller share of the money market 

universe 

Source: ICI

87%

11%

0%

20%

40%

60%

80%

100%

2007 2009 2011 2013 2015 2017 2019 2021

% of total MMF assets

Tax Exempt Government Prime

Sep-08, 28%

Nov-15, 17%

Mar-20, 28%

Sep-08, -9%

Nov-15, -10%

MMF reform

Oct-16, -40%

Mar-20, -12%

Vanguard Prime 

Fund conversion 

Sep-20, -20%

-60%

-40%

-20%

0%

20%

40%

60%

2007 2009 2011 2013 2015 2017 2019 2021

% change in assets over rolling 4 weeks

Government MMF Prime MMF
4

Prime MMFs do not rely on Treasuries to fund redemptions, even post reform

How have prime MMFs funded redemptions in previous large episodes • In four large redemption episodes since 2008, the common 

theme is that prime MMFs were reluctant to sell Treasuries 

to fund redemptions when risk aversion was high

• Specifically, 

• In Nov’15, prime MMFs total assets declined by $142bn 

(by 10%). Treasury holdings were largely unchanged and 

redemption was funded through a decline in 

Repo/agency holdings

• CP holdings were unchanged, and CD share of 

holdings increased. This highlights lack of secondary 

market intermediation in these instruments

• During money market reform driven redemptions in 

2016, prime MMF assets declined ~$850bn (by 70%). 

Given the structural asset realignment, all assets 

declined roughly pro-rata, with Treasuries falling $30bn

• Allocation to Treasuries increased post reform and 

Weekly Liquid Assets (“WLA”) metric increased

• In Mar’20 (pandemic), despite having higher liquidity 

profile, prime MMFs did not rely on Treasuries when 

faced with $160bn (or 15% of assets) in redemptions in 

Mar’20 (pandemic). 

• Rather, Treasury holdings actually increased $8bn. 

CP and CD holdings, as percent of assets, 

declined far less than agencies

• Several large sponsors, such as Vanguard, Fidelity and 

Northern Trust, tilted their MMF offerings more toward a 

government portfolio in Q3-Q4’20. Given that this was 

also a structural shift like 2016, all holdings declined 

roughly pro-rata

• In times of high risk aversion, prime MMFs are reluctant 

to sell Treasuries to maintain the liquidity profile and 

keep dry powder for possible further redemptions

Source: Crane Data

Nov15 Episode (pre-reform) Assets Treasuries Agencies Repo CD CP Other

Pre-drawdown (Oct'15), $bn $1,382 $44 $121 $330 $455 $240 $192 

Redemption (Nov'15) , $bn $1,240 $38 $60 $194 $477 $241 $230 

Change, $bn (%) -$142 -$6

(-13%) 

-$61

(-50%) 

-$136

(-41%) 

$22

(5%) 

$1

(1%) 

$38

(20%) 

MMF reform Treasuries Agencies Repo CD CP Other

Pre-drawdown (Feb'16) , $bn $1,236 $58 $60 $165 $487 $223 $243 

Drawdown (Mar-Oct'16) , $bn $374 $28 $5 $69 $151 $61 $60 

Change, $bn (%) -$862 -$30

(-52%) 

-$55

(-92%) 

-$97

(-58%) 

-$336

(-69%) 

-$162

(-72%) 

-$183

(-75%) 

Mar20 Episode Treasuries Agencies Repo CD CP Other

Pre-drawdown (Feb'20) , $bn $1,089 $88 $67 $210 $286 $262 $175 

Drawdown (Mar'20) , $bn $930 $96 $42 $182 $239 $230 $141 

Change, $bn (%) -$159 $8

(9%) 

-$25

(-37%) 

-$28

(-13%) 

-$47

(-17%) 

-$33

(-12%) 

-$35

(-20%) 

Prime fund conversion Treasuries Agencies Repo CD CP Other

Pre-drawdown (Jul'20) , $bn $1,122 $326 $75 $152 $202 $218 $149 

Drawdown (Oct'20) , $bn $959 $268 $62 $156 $149 $173 $152 

Change, $bn (%) -$163 -$58

(-18%) 

-$13

(-17%) 

$4

(2%) 

-$53

(-26%) 

-$45

(-21%) 

$3

(2%) 
5

Alignment of WLA thresholds with gates/fees often serve as triggers for action

Prime fund redemptions tend to pick up at lower WLAs ....

• Prime MMFs investor behavior shows greater 

redemption pressure at lower WLA levels

• The chart plots the ratio of 90th percentile cash flow 

and 10th percentile cash flow at various levels of WLA 

• At lower WLA, the size of the “chunkier” outflows is 

significantly larger than the size of chunkier inflows. 

This is not true at higher WLAs

• This demonstrates that investors tend to preemptively withdraw larger amounts as funds 

approach WLA levels where imposition of gates/fees 

is a possibility

• Under the gates/fees provisions provided in the 2014 

money market reforms, boards of MMFs funds are 

permitted to impose a liquidity fees of up to 2% or to 

temporarily suspend redemptions if the fund’s WLA 

falls below the 30% minimum threshold. 

• Funds must impose a 1% liquidity fee if WLA falls 

below 10% threshold, unless the fund’s board 

determines that imposing the fee is not in the 

best interests of the fund 

• These provisions linked levels of liquidity with 

redemption gates/fee, and exacerbated first-mover 

advantage for pre-emptive redemption (notably 

institutional investors)

• Therefore, proposals that reform conditions for 

imposing redemption gates/fees, such as through a 

biweekly WLA, might result in more stable cash flows 

at prime MMFs

Source: Crane data

Source: Crane data

0.0

0.4

0.8

1.2

1.6

2.0

35 40 45 50 55

WLA

Ratio of 90th percentile cash flow vs 10th percentile cash flow

Prime MMFs
6

Prime MMFs holdings of Treasuries are not significant, even as those of CP/CD are

Prime MMFs hold relatively small amounts of Treasuries and 

Treasury Repo • As total assets in prime MMFs have shrunk over the 

past year, Treasury holdings have reduced relative to 

CP (commercial paper)/CD/repo holdings, reversing 

the earlier trend

• This is likely driven by competitive pressures in a 

low yield environment

• Prime MMFs hold a small amount of Treasuries 

($160bn), relative to government MMFs ($2.2trn). 

For context, there are $4.3trn T-bills and $21.7trn 

marketable Treasury debt outstanding

• Therefore, the vulnerability of prime funds to “runlike” behavior is not a challenge to the Treasury 

market from a macro perspective

• However, prime MMFs are a much larger presence in 

non-Treasury short-term funding markets

• Prime MMF CP holdings are 40% of domestic CP 

outstanding and 20% of total CP outstanding

• As spreads on these assets widen in times of stress, 

prime funds with large allocation to these assets 

experience redemptions, worsened by the firstmover advantage and limited secondary market 

intermediation

Source: Crane data data

While prime MMFs hold a small share of Treasuries outstanding, 

their holdings of CP are significant

Source: ICI, Federal Reserve

 -

 100

 200

 300

 400

 500

 600

 700

 800

 900

 1,000

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

$bn

Prime MMF holdings

Treasuries Agencies Repo CP and CD

0%

20%

40%

60%

80%

2017 2018 2019 2020 2021

CP holdings in prime MMFs, as % of CP outstanding

Prime Funds, % of domestic CP

Prime Funds, % of domestic+foreign CP
7

President’s Working Group (PWG) on Financial 

Markets’ Proposal Evaluation
8

PWG’s potential reform options for money market funds 

- Effective in presenter’s view

Proposal Details SIFMA AMG Response Presenter’s View

Removal of tie 

between MMF 

liquidity and fee 

and gate thresholds

Remove link between the 

30 percent and 10 percent 

WLA thresholds and the 

imposition of fees and 

gates 

“Strongly supports”, “most 

directly and meaningfully 

addresses”

Very effective – greater flexibility to tap liquid assets

Money market fund 

liquidity 

management 

changes

New categories of liquidity

requirements (bi-weekly 

liquid assets - BWLA), 

additional liquidity 

thresholds

“Does not generally oppose”, 

“Focus on [funds] that 

experienced higher 

redemptions”

Effective in conjunction with above proposal

We believe that delinking WLA requirements from imposition of gates/fees 

is the most effective reform. This can be best achieved in combination with 

liquidity management changes that create a “gap” between gates/fees and 

liquidity thresholds

Proposals such as the following would improve the resilience of prime MMFs

• mandating a minimum holding of Treasuries/government securities, 

• limiting CP exposure, 

• maturity cap on CP purchases (for example 3m), and 

• shortening the weighted average life limit from 120days 

Floating NAV for all 

prime and taxexempt money 

market funds

Retail prime MMFs and taxexempt MMFS sell and 

redeem shares at market 

prices

“Generally oppose”, “did not 

prove effective”

Effective in promoting transparency

Floating NAVs are generally much more transparent than most other 

measures such as MBR and swing pricing. Given that shadow NAV’s are 

published daily, they are effectively another trigger

Floating NAVs will likely force a reallocation of risk, and thereby, make the 

industry more resilient

Downside is that it likely increases funding costs for CP issuers, assuming the 

market does not evolve and create non-MMF sources of funding for credit 

issuers

Reform of 

conditions for 

imposing

redemption gates

Notify the SEC prior to 

imposing gates, Consider 

liquidity fee before gates, 

lower WLA threshold to 

10% for gates, soft/partial 

gates

“Less effective” Effective when combined with liquidity management changes that result in a 

higher liquidity profile
9

PWG’s potential reform options for money market funds

- Ineffective in presenter’s view

Proposal Details SIFMA AMG Response Presenter’s View

Minimum Balance 

At Risk (“MBR”)

A portion of balance is 

available for redemption 

only with a time delay

“Strongly opposes” Less effective. This proposal will explicitly apportion a certain amount of 

assets that are not available for immediate liquidation. In the event of a loss, 

redeeming shareholders would lose their MBRs first

Implementation hurdles would be determining the size of the MBR and 

communication challenges around its calibrated, and assessment over time

Countercyclical 

WLA requirements

Minimum WLA 

requirements could 

automatically decline in 

certain circumstances

“Less effective policy 

measure”, “Potential to create 

a bright line test”

Less effective. Allowing WLA requirements decline during times of stress

seems much less effective and less straightforward than simply de-linking 

WLA requirements and the trigger for fees and gates

Both measures endeavor to diminish the run-risk created by the WLA 

threshold

Swing pricing 

requirement

Adjust fund’s NAV

downward when net 

redemptions exceed a 

threshold

“Does not support”, 

“significant costs and 

burdens associated with 

implementation”

Less effective. This proposal would adjust NAVs downward for transactions 

cost when net redemptions exceed some threshold, and presumably this 

netting occurs at the end of day

It seems redundant considering that MMFs can already charge liquidity fees. 

They both achieve the same outcome

Operational hurdles in implementing swing pricing:

• It has not been tested in a cash settlement environment, and if the swing 

price is determined on a net basis, same day settlement will be difficult, if 

not impossible, due to timing issues. 

• This change could impair same day liquidity

• Some MMFs strike NAVs intraday. So, it’s not clear how swing pricing can

be overlaid in this context

Capital buffer 

requirements

Dedicated resources within 

or alongside a fund to 

absorb losses

“Strongly opposes” A buffer designed to absorb credit and liquidity risk could be significant, and 

therefore, reduce the attractiveness and viability of prime funds

Require Liquidity 

Exchange Bank 

(“LEB”) membership

Prime MMFs required to be 

members of a private 

liquidity exchange bank

“Strongly opposes” Presumably there is a significant cost associated with membership as the 

potential size of the support could be significant. The impact is similar to 

capital buffers. This proposal reduces product viability

New requirement 

governing sponsor 

support

A regulatory framework 

governing sponsor support

to clarify who bears MMF 

risks

“Strongly opposes” Mandating sponsor support would likely increase cost for investors, and 

similar to capital buffers and LEB membership, reduce the viability of prime 

funds
10

Tradeoffs in presented prime MMF reform proposals

Proposal Ease of 

implementation

Impact on prime MMFs 

in normal times

Impact on prime MMFs 

in times of stress

Shift towards Gov’t 

MMFs

Removal of tie between MMF 

Liquidity and Fee and Gate 

Thresholds

+ o + o

Money Market Fund Liquidity 

Management Changes + - + o

Floating NAV for all Prime and Taxexempt Money Market Funds o o + +

Reform of conditions for imposing

Redemption Gates + o + o

Minimum Balance At Risk (“MBR”) - - + +

Countercyclical WLA Requirements - o + o

Swing Pricing Requirement - - + o

Capital Buffer Requirements - - + +

Require Liquidity Exchange Bank 

(“LEB”) Membership - - + +

New Requirement Governing 

Sponsor Support - - + +

+: positive, -: negative, o: neutral
11

Summary of proposal evaluation

• Proposals presented in the President’s Working Group on Financial Markets range from modest but easily implementable to those

requiring aggressive changes 

• Changes to prime MMFs should effectively balance the tradeoffs between attractiveness of yields in normal times and resilience in 

times of stress 

• However, proposals that promote greater liquid holdings also tend to lower yields and reduce the gap between prime and 

government MMFs

• Proposals that seek to reduce the first-mover advantage in redemptions through liquidity or credit cost sharing often are 

complex to administer or costly to institute and achieve the stated goals only partially

• Overall, the following proposals appear to strike the best balance:

• Weaken link between regulatory thresholds and gates/fees - Provide greater flexibility to tap liquid assets to meet redemptions

• Reform conditions for imposing redemption gates - Reduce incentive for investors to pre-emptively redeem

• Liquidity management requirement changes - Increase liquidity profile through additional categories like biweekly liquid assets

• Floating NAV for all Prime and Tax-exempt MMFs – Improve transparency and set clearer expectations of fund risks for investors 

• Other proposals, in our opinion, might face greater challenges in their implementation

• Minimum balance at risk and swing pricing requirement - Complex and hard to administer 

• Likewise, implementation of countercyclical WLA requirements would be challenging, while addressing the pre-emptive 

redemption incentive problem only partially

• Capital buffers, liquidity exchange membership and new requirements for sponsor support are challenging from appropriate 

sizing and cost perspective and can reduce product viability
12

Proposals promoting dipping into Treasuries in times of stress could be effective

Prime MMFs tend not to dip into Treasury holdings to fund large 

redemptions • The chart on the left plots changes in Treasury 

holdings for prime MMFs vs changes in assets over 

a rolling 4 week period

• It shows that prime MMFs are reluctant to dip into 

Treasury reserves to fund large redemptions

• Concerns around dipping below the WLA threshold 

and triggering gates, which would further prompt 

investor redemptions, contribute to this behavior 

• Therefore proposals that weaken the tie between 

regulatory thresholds and gates/fees are attractive

• WLA holdings at prime funds differs significantly by 

size of the fund, with larger funds typically holding 

higher WLAs 

• Proposals that set WLA thresholds higher would 

standardize the prime MMF industry more and aid 

in weakening the tie between regulatory WLA 

thresholds and gates/fees

• This is likely to create a cushion for prime MMFs to

dip into Treasuries to fund redemptions in times of 

stress

Source: ICI

WLA metrics show large gap between larger and smaller prime MMFs

Source: Crane data

 $(80)

 $(60)

 $(40)

 $(20)

 $-

 $20

 $40

 $60

 $80

 $(400) $(300) $(200) $(100) $- $100

4wk change in prime MMF Treasury 

holdings, $bn

4wk change in prime MMF Assets, $bn

Sep2020 Vanguard Prime Fund conversion

 -

 10

 20

 30

 40

 50

 60

 70

 80

2016 2017 2018 2019 2020 2021

% of assets

WLA 

100m-1b 10b-50b 1b-10b 50b+

Source: ICI
13

Additional recommendation 1:

Proposals promoting higher liquidity thresholds, and thereby reduced dispersion, are likely to be effective

• Redemptions that start at prime MMFs with riskier asset 

allocation in times of stress can become industry wide 

episodes

• For instance, even though 30-40% WLA funds saw greater 

redemptions as % of assets, even 50-80% WLA funds had 

outflows

• This necessitates a focus on dispersion between prime MMFs

• Funds with AUM larger than $50bn on average allocate 

35% of assets to Treasuries . For funds smaller than 

$50bn in assets, allocation to Treasuries has increased 

since 2019 but still remains at 5-10%

• WLAs at larger funds are meaningfully higher 

• Smaller funds have a greater inclination for bar-belling 

portfolios

• In this context, regulations that reduce the highlighted 

dispersion would be a positive step

• These regulations could raise the liquidity profile of prime 

funds to a greater threshold - perhaps even mandating 

allocation to Treasuries and Treasury repo

• If all prime funds allocated the same proportion of assets to 

Treasuries as $50bn+ sized funds, it would increase demand 

for short-term Treasuries by $170bn (4% of T-bills 

outstanding)

Even though lower WLA funds saw greater redemption, 

higher WLA funds experienced redemptions too

-30%

-20%

-10%

0%

10%

20%

30%

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

Net inflows, % of assets

30-40 WLA 40-50 WLA 50-80 WLA

Source: Crane data

Larger prime MMFs have significantly greater % of assets in 

Treasuries

Source: Crane data

 -

 5

 10

 15

 20

 25

 30

 35

 40

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

% of assets

Treasury holdings at prime MMFs

100m-1b 1b-10b 10b-50b 50b+
14

Additional recommendation 2

Should regulators take steps to minimize or eliminate prime MMFs?

• Prime MMFs have required multiple government backstops 

over the past fifteen years, despite meaningful reforms

• At the same time, high expense ratios have limited the 

pass through of higher yields (vis a vis government MMF) 

to final investors 

• Proposals that make prime MMFs more liquid also 

necessarily make them more “government MMF” like

• Therefore, should regulators take steps to minimize or 

eliminate the existence of prime MMFs?

• Some of the PWG proposals being considered could have 

this impact due to the operational complexity or costs 

associated with implementation

• Impact of prime MMF industry shrinking further:

• From Treasury perspective, $1 lesser AUM in prime 

MMFs would translate into extra $0.40 demand for 

short-term Treasuries, assuming this dollar shifts to 

government MMFs and static allocation 

• Experience post 2014 reform shows that financial CP 

outstanding remained relatively steady even as CP 

holdings of prime MMFs declined. 

• The impact on non-financial CP was even lesser

• In addition, short-term securities issued by 

corporate/other sponsors can potentially be purchased 

by mutual funds whose mandate includes a short-term 

allocation. On the margin, this might encourage the 

issuing entities to further term out debt

Prime MMFs hold relatively small share of Treasuries outstanding

0

100

200

300

400

500

600

700

800

 -

 50

 100

 150

 200

 250

 300

2013 2015 2017 2019 2021

$bn$bn

CP holdings at prime MMFs vs financial CP outstanding

CP holdings prime MMFs Financial CP Outstanding (RHS)

Financial CP outstanding remained steady even as prime MMFs’ 

CP holdings declined post 2014 reform and then recovered

Source: Crane data, Macrobond

Source: Crane data, Bloomberg

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2012 2014 2016 2018 2020

Prime MMFs Treasury holdings, 

% of marketable Treasury debt outstanding
15

Case study: Market reaction to closure of prime MMFs in late Q3’20 was minimal

• Prime assets shrank 18% in late Q3’20, driven by a 35% 

decline in retail funds. Several large sponsors, such as 

Vanguard, Fidelity and Northern Trust, tilted their MMF 

offerings more toward a government portfolio1

• This time period offers a window to assess impact of 

prime assets declining, as these outflows were not driven 

by a risk-off environment

• In this period, Treasury holdings of prime MMFs 

declined by $58bn and have declined by $160bn 

(~50%) cumulatively from July’20 to date 

• This decline of $160bn does not appear material 

in the context of $4.3trn in marketable bills 

outstanding and $2.2trn Treasury bills holdings at 

government MMFs

• Amid the decline in prime assets, CP holdings 

shrank by 23% of assets. However, 30day and 

90day CP yields actually declined in this time 

period, likely as financial CP outstanding declined 

as well. 

Prime MMF assets declined 18% in Sep’20

1:https://institutional.vanguard.com/VGApp/iip/site/institutional/researchcommentary/articl

e/NewsInstInfo08272020

$bn Jul'20 Nov'20 Current 

(Jun'21)

Change from 

Jul'20 to 

Nov'20

Change from 

Jul'20 to 

Jun'21

Prime MMF Assets $1,122 $924 $900 -$199 (-18%) -$222 (-20%) 

Prime Institutional $678 $637 $672 -$41 (-6%) -$6 (-1%) 

Prime Retail $444 $287 $228 -$157 (-35%) -$216 (-49%) 

Treasury holdings $326 $268 $166 -$58 (-18%) -$160 (-49%) 

Repo holdings $152 $132 $175 -$20 (-13%) $23 (15%) 

CP holdings $218 $168 $227 -$50 (-23%) $8 (4%) 

Source: Crane data

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

Jun-20 Aug-20 Oct-20 Dec-20 Feb-21 Apr-21 Jun-21

CP yields, %

30d CP yield, % 90d CP yield, %

Source: Bloomberg

In the period where prime MMF CP holdings declined 

sharply, CP yields actually declined
16

Prime MMFs yield advantage over government funds has shrunk post pandemic

Prime MMFs offer increasing smaller yield pickup over similar 

sized government MMFs • Prime MMFs yield pickup over similar sized government 

MMFs has shrunk in the current low yield environment

• In the higher yield environment of 2016-20, prime 

MMFs offered 20-30bp yield pickup versus similar 

sized government funds, but this has shrunk 

significantly to sub 5bp post Fed easing in the 

pandemic

• A low yield environment benefits funds with 

economies of scale and low expense ratio

Source: Crane data

Source: Crane data

 -

 10

 20

 30

 40

 50

 60

 70

2016 2017 2018 2019 2020 2021

bp

100m-1b 1b-10b 10b-50b 50b+

Net yield pickup in prime vs government MMF (similar AUM)