Quarterly Refunding Char

January 31, 2005

Office of Debt Manageme
2

Current Financin

• FY 2005 Q2 and FY 2005 Q3 Outlook

– We expect net marketable borrowing of 

quarter and $12 billion next quarter

• Projections of borrowing needs have risen • Net interest is estimated at $180 billion for 
3

• Estimated net market borrowing for the 

Jan-March 2005 quarter, if realized, is similar to the actual net market borrowing of $146 billion in Jan-Mar 2004.

• Actuals for Oct-Dec were in line with 

expectations.

• Cash balances have been within 

historical ranges.

Treasury Daily Opera

0

1 02 03 04 05 06 0

Oct Nov Dec Jan Feb Mar A

$ billions

FY 2003FY 2004FY 2005

N ote: Data thro

 Treasury Financing 

($ Bil

 (Projected) 

Deficit Funding (Def + / Surplus -) 127 Means of Financing

Change in Cash Balance 11 Net Non-Marketable Financing 5 Net Marketable Financing 100 Other* 10 

Net Marketable Financing 100 

Bills Nominal Notes TIPS Bonds 

Notes:Starting Cash Balance 36 Ending Cash Balance 25 

* Includes direct loan activity, changes in accrued interest and checks outstanding anNote: Totals may not add due to rounding

 October 
4

• Financing needs are being met by 

net new issuance across the nominal and TIPS curves.

• Small pay downs in 2-yr notes and 

nominal bonds.

• State and Local Govt. Series 

(SLGS) were the only source of net new cash from non-marketable issuance, despite SLGS suspension in Fall 2004. 

Treasury Quarterly N

Calenda

-20.1

-26.1

17.8

-163.4

52.1

15

-192.1

-47.7

52.5

74.4

-200-160-120

-80-40

0

4080

120160

I-00 II III IV I-01 II III IV I-02 I

$ billions

Treasury Quarterly Net Borrow

 Calend

-8.0

-5.0

-10.1

-2.2

-1.4

-1.7

-10.6

0.8

-5.5

-0.1 

-15-10

-5

05

1015

I 00 II III IV I 01 II III IV I 02 II 

$billions

State and LocalGovt. SeriesSavings BondsForeign Series
5

• Current forecasts suggest 

outlays closer to historical norms then MSR projection (shown here).

• Bill growth manageable with 

current coupon pattern.

Projected Net M arketable Borrow ing an

If Coupon Auction Size

05

1 01 52 02 53 03 54 0

2005 2006 2007 

Average Announced 

Auction Size $ Billions

412

A ssum es O M B 's FY 2005 M SR deficit projections (except internal T reasury estirecently announced amounts. Bill issuance sizes are shown in fixed shares to me

Net Marketa

Drivers of Finan

-5

05

1015202530

1960 1965 1970 1975 1979 1984 

Percentage of GDP

SOURCE: OMB MSR Budget FY 2005
6

• Coupon sizes show reasonable 

growth under MSR deficit projection and constant bill issuance.

Projected Net Marketable Borrowing 

If Bill Issuance held Cons

05

1015202530354045

2005 2006 2007 

Announced 

auction sizes 

$ billions

BILLS 2-YEAR 3-YEAR 5-YEAR 10-YEAR 

Net Marketable Borrowing (RHS)

* *For bills, the average auction size equals the amount outstanding at the end  (i.e., 4 1-month auctions, 13 3-month auctions, plus 26 6-month auctions).
7

Debt Portfolio

• Average maturity of issuance has stabilized at roug

• Maturity of total outstanding drops from 4.6 years 

4 years over the next 5 years

• Composition of nominal issuance is within historica

• Current issuance patterns lead to a growing propor

and TIPS in the portfolio

• The percent of debt maturing with 3 years or less to 

projected to remain stable at slightly more than 60%
8

• Average maturity of outstanding 

debt continues to decline due to maturing bonds.

• Average maturity of issuance is 

projected to be stable because coupon issuance meets projected financing needs.

• Current issuance consistent with 

historical patterns.

Percentage Breakdown o

0%

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

1980 1982 1984 1986 1988 1990 1992 1994 1

Bills 2-3 yrs 4-7 yrs 

Projections based on OM B's FY 2005 M SR (except internal Treasury estimamost recently announced amounts. Residual amounts financed with bills.

DEBT MATURITY 

2030405060708090

1980 1982 1984 1986 1988 1990 1992 1994 

months

Average M

Average Maturity 

1/ The average maturity of issuance is the ultimate average maturity achieved if coupon iof financing needs are met with changes in bill issuance. (4 quarter moving average).

Assumptions: FY05 MSR Budget (except internal Treasury estimand coupon issuance maintained at current assumed levels.
9

• Bonds continue steady pay down 

pace.

• TIPS growth continues.• Maturing debt with 1-3 years is 

increasing, consistent with declining average maturity.

Distribution of Marketable De

0%5%

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

1980 1982 1984 1986 1988 1990 1992 1994 

BILLS 2-3 YR NOTES 4-7 YR NOTES 

Projections based on OMB's FY 2005 MSR (except internal Treasury estimmost recently announced amounts. Residual amounts financed with bills. 

Percentage of Debt Maturin

25%30%35%40%45%50%55%60%65%70%75%

1980 1982 1984 1986 1988 1990 1992 1994 

Maturing in 12 Months

Maturing in 24 Months

Maturing in 36 Months

Projections based on OM B's FY 2005 M SR (except internal Treassizes remain at most recently announced amounts. Residual amoun
10

• Longer-dated coupons providing 

greatest share of net new financing.

Treasury Annual Net M

-300-200-100

0

100200300400500

1998 1999 2000 2001 2002 2003 200

$ Billions

Buybacksover 10 years5-10 years2-under 5 yearsBills

Projections are based on FY 2005 OMB's MSR (except internal Treasury esremain at most recently announced amounts. Residual amounts financed w
11

Uncertainty

• Deficit forecast errors for FY 2004 were comparab

forecast errors

• Current issuance pattern equally well positioned fo

deficits
12

• Primary dealer estimates are in 

line with recent CBO release.

• FY 2005 residual has increased 

due to increased Treasury net financing estimate.

• New out year forecast available 

February 7.

Financing Residuals Given Curr

Assumes current coupon issuance pattern and issuance amount-- 

outstanding FY $ amounts equal to Septemb

-300-200-100

0

100200300400500600700

2005 2006 2007 

Fiscal Year

$ billions

Net financing implied by FY05 OMB MSR Budget 

deficit forecast

Net financing plus average absolute error 

in OMB estimate

Net financing

minus avg. absolute error in OMB est.

Bars indicate estimated change in financing required in given year for different deficit outcomes

Note: FY 2005 Net Financing amount is an internal Treasury estimate.

Note: Average historical errors were estimated with a linear least-squares regression using OMB

Pr

Current: 

Range based on average absolute error 

Estimates as of: 

Note: Ranges based on Errors from 1997-2004 

FY 05 Deficit E
13

Capital Market

• Foreign holdings of Treasury debt continue at histo• Treasuries represent a small proportion of the dom
14

• Foreign holdings growth at 

53 percent of privately held debt. 

Foreign Holdings as a Pecent of Total Pr

0%

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

1993 1994 1995 1996 1997 1998 1999 

Calendar Year

Percent

Estimated foreign holdings as % of private. 2/Foreign and International Institutional Holdings atFRBNY as % of private. 3/

Benchmark Revisions

1/ Privately held debt excludes holdings of the Federal Reserve.2/ Data through Nov. 30, 2004. See www.treas.gov/tic/indec.html.3/ Source: Federal Reserve Bank of NY statistical release H4.1.
15

• Treasury a stable portion of 

U.S. money markets.

• Primary dealers were less 

short nominals in second half of year.

• Primary dealers shorting of 

TIPS stays on trend.

Outstanding Short-term Marketable Treasu

Market Instr

25%30%35%40%45%50%55%60%65%70%75%

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 

Calendar Quart

Short-term Marketable Treasuries = Treasury bills and Treasury coupMoney Market = Short-term Treasury securities, commercial paper, aSources: U.S. Treasury and U.S. Federal Reserve Board of Governo

Net Primary Dealer Positi

-3-2-1

0123456

Feb-01 Apr-01 Jun-01 Aug-01 Oct-01 Dec-01 Feb-02 Apr-02 Jun-02 Aug-02 Oct-02 Dec-02 Feb-03 Apr-03 

TIPS 

($ billions)

TIPS (LHS)TIPS auctionsNominal Treasuries (RHS)

TIPS zero line

Source: NY Fed

TIPS Auction Weeks
16

Auction Release Time Perfor

Exceptions to Treasury’s 2 minute auction release 

11/08/04 – 3-Year Note: An unintended reopening required manual intervention 

minutes to process the auction.

11/10/04 – 10-Year Note: The mainframe program which initiates the creation of 

approximately one minute longer than normal. 

11/29/04 – 13- and 26-week Bills: Trouble with connections to some primary dea

morning. Several dealers ultimately phoned in bids. Further internal probsystems that receive bids and the system that processes the auction and ca

exceed 28 minutes.

Auction Release Times for February 2004 - 

Data through January 19, 2005

0:000:301:001:302:002:303:003:304:004:305:00

February M arch April M ay June July August September 

(In Minutes and Seconds)

* Release time of 28 minutes, * Release time of 28 minutes, 2

Target release time range