Treasury Presentation to TBAC
Office of Debt Management

Fiscal Year 2014 Q1 Report
Table of Contents

2

I. Fiscal

A. Quarterly Tax Receipts p. 4

B. Monthly Receipt Levels p. 5

C. Eleven Largest Outlays p. 6

D. Treasury Net Nonmarketable Borrowing p. 7

E. Cumulative Budget Deficits p. 8

F. Deficit and Borrowing Estimates p. 9

G. Budget Surplus/Deficit p. 10

II. Financing

A. Sources of Financing p. 12

B. OMB’s Projections of Net Borrowing from the Public p. 14

C. Interest Rate Assumptions p. 15

D. Net Marketable Borrowing on “Auto Pilot” Versus Deficit Forecasts p. 16

III. Portfolio Metrics

A. Weighted Average Maturity of Marketable Debt Outstanding with Projections p. 20

B. Recent and Projected Maturity Profile p. 21

IV. Demand

A. Summary Statistics p. 26

B. Bid-to-Cover Ratios p. 27

C. Investor Class Awards at Auction p. 31

D. Primary Dealer Awards at Auction p. 35

E. Direct Bidder Awards at Auction p. 36

F. Foreign Awards at Auction p. 37
Section I:

Fiscal

3
-50%

-25%

0%

25%

50%

75%

Dec-02

Mar-03

Jun-03

Sep-03

Dec-03

Mar-04

Jun-04

Sep-04

Dec-04

Mar-05

Jun-05

Sep-05

Dec-05

Mar-06

Jun-06

Sep-06

Dec-06

Mar-07

Jun-07

Sep-07

Dec-07

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Dec-13

Year over Year % Change

Quarterly Tax Receipts

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

4 Source: United States Department of the Treasury 
 -

 20

 40

 60

 80

 100

 120

Dec-02

Mar-03

Jun-03

Sep-03

Dec-03

Mar-04

Jun-04

Sep-04

Dec-04

Mar-05

Jun-05

Sep-05

Dec-05

Mar-06

Jun-06

Sep-06

Dec-06

Mar-07

Jun-07

Sep-07

Dec-07

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Dec-13

$ bn

Monthly Receipt Levels

(12-Month Moving Average)

Individual Income Taxes Corporation Income Taxes Social Insurance Taxes Other

5

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 
6

0

50

100

150

200

250

HHS

SSA

Defense

Treasury

Agriculture

Labor

VA

Transportation

OPM

Education

Other Defense Civil

$ bn

Eleven Largest Outlays

FY 2013 Q1 FY 2014 Q1

Source: United States Department of the Treasury 
(40)

(30)

(20)

(10)

0

10

20

30

Q1-03Q2-03Q3-03Q4-03Q1-04Q2-04Q3-04Q4-04Q1-05Q2-05Q3-05Q4-05Q1-06Q2-06Q3-06Q4-06Q1-07Q2-07Q3-07Q4-07Q1-08Q2-08Q3-08Q4-08Q1-09Q2-09Q3-09Q4-09Q1-10Q2-10Q3-10Q4-10Q1-11Q2-11Q3-11Q4-11Q1-12Q2-12Q3-12Q4-12Q1-13Q2-13Q3-13Q4-13Q1-14

$ bn

Treasury Net Nonmarketable Borrowing

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

7 Source: United States Department of the Treasury 
0

200

400

600

800

1,000

1,200

1,400

October

November

December

January

February

March

April

May

June

July

August

September

$ bn

Cumulative Budget Deficits by Fiscal Year

FY2012 FY2013 FY2014

8 Source: United States Department of the Treasury 
In $ Billions

Primary 

Dealers1 CBO2

CBO's Estimate

of the

President's Budget3 OMB4

FY 2014 Deficit Estimate 597 560 675 750

FY 2015 Deficit Estimate 507 378 437 626

FY 2016 Deficit Estimate 502 432 413 578

FY 2014 Deficit Range 464-720

FY 2015 Deficit Range 300-685

FY 2016 Deficit Range 350-710

FY 2014 Net Marketable Borrowing Estimate 702 649 754 874

FY 2015 Net Marketable Borrowing Estimate 609 471 530 787

FY 2016 Net Marketable Borrowing Estimate 608 510 497 736

FY 2014 Net Marketable Borrowing Range 595-844

FY 2015 Net Marketable Borrowing Range 400-844

FY 2016 Net Marketable Borrowing Range 450-864

Estimates as of: Jan-14 May-13 May-13 Jul-13

FY 2014-2016 Deficits and Net Marketable Borrowing Estimates 

1

Based on primary dealer feedback on Jan 27, 2014. Estimates above are averages. 

2

Table 1 and 5 of the "Updated Budget Projections: Fiscal Years 2013 to 2023"

3

Table 1 and 2 of the "An Analysis of the President's 2014 Budget"

4

Table S-5 and S-11 of the "Fiscal Year 2014 Mid-Session Review Budget of the US Government"

9
 OMB’s Projection

Projections are from Table S-5 and S-6 of the “Fiscal Year 2014 Mid-Session Review Budget of the US Government.” 

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

(2,500)

(2,000)

(1,500)

(1,000)

(500)

0

500

20012002200320042005200620072008200920102011201220132014201520162017201820192020202120222023

$ bn

Fiscal Year

Budget Surplus/Deficit

Surplus/Deficit in $ bn (L) Surplus/Deficit as a % of GDP (R)

10
Section II:

Financing

11
12

Sources of Financing in Fiscal Year 2014 Q1

*Assumes an end-of-December 2013 cash balance of $162 billion versus a beginning-of-October 2013 cash balance of $88 billion. By keeping the 

cash balance constant, Treasury arrives at the net implied funding number. 

Net Bill Issuance 62 Issuance Gross Maturing Net Gross Maturing Net

Net Coupon Issuance 202 Bills 4-Week 480 500 (20) 480 500 (20)

Subtotal: Net Marketable Borrowing 264 Bills 13-Week 422 390 32 422 390 32

Bills 26-Week 367 340 27 367 340 27

Ending Cash Balance 162 Bills 52-Week 72 75 (3) 72 75 (3)

Beginning Cash Balance 88 Bills CMBs 81 55 26 81 55 26

Subtotal: Change in Cash Balance 74 Bill Subtotal 1,422 1,360 62 1,422 1,360 62

Net Implied Funding for FY 2014 Q1* 190

Issue Gross Maturing Net Gross Maturing Net

COUPON 2-Year 96 109 (13) 96 109 (13)

COUPON 3-Year 90 98 (8) 90 98 (8)

COUPON 5-Year 105 83 22 105 83 22

COUPON 7-Year 87 0 87 87 0 87

COUPON 10-Year 66 31 35 66 31 35

COUPON 30-Year 42 0 42 42 0 42

TIPS COU 5-Year TIPS 16 0 16 16 0 16

TIPS COU 10-Year TIPS 13 0 13 13 0 13

TIPS COU 30-Year TIPS 7 0 7 7 0 7

Coupon Subtotal 522 320 202 522 320 202

Total 1,944 1,680 264 1,944 1,680 264

Coupon Issuance

October - December 2013 October - December 2013 Fiscal Year to Date

Bill Issuance

October - December 2013 Fiscal Year to Date
13

Sources of Financing in Fiscal Year 2014 Q2

*Keeping issuance sizes and patterns constant for Nominal Coupons and TIPS, as of 12/31/2013, while using average CY 2013 issuance sizes for 

Bills

**Assumes an end-of-March 2014 cash balance of $130 billion versus a beginning-of-January 2014 cash balance of $162 billion.

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

*** FRN issuance amounts are consistent with Treasury guidance of $10-$15 bn and are for illustrative purposes only 

Assuming Constant Coupon and Average Bill Issuance Sizes as of 12/31/2013*: Issuance Gross Maturing Net Gross Maturing Net

Net Bill Issuance 58 4-Week 520 495 25 1,000 995 5

Net Coupon Issuance 202 13-Week 416 422 (6) 838 812 26

Subtotal: Net Marketable Borrowing 260 26-Week 364 325 39 731 665 66

52-Week 75 75 0 147 150 (3)

Treasury Announced Estimate: Net Marketable Borrowing** 284 CMBs 0 0 0 81 55 26

Implied: Increase In FY 2014 Q2 Net Issuances 24 Bill Subtotal 1,375 1,317 58 2,797 2,677 120

Issue Gross Maturing Net Gross Maturing Net

2-Year 96 107 (11) 192 216 (24)

2-Year FRN 39 0 39 39 0 39

3-Year 90 97 (7) 180 195 (15)

5-Year 105 101 4 210 184 26

7-Year 87 0 87 174 0 174

10-Year 66 28 38 132 59 73

5-Year 30-Year 42 0 42 84 0 84

10-Year 5-Year TIPS 0 0 0 16 0 16

30-Year 10-Year TIPS 28 27 1 41 27 14

30-Year TIPS 9 0 9 16 0 16

Coupon Subtotal 562 360 202 1,084 680 404

Total 1,937 1,677 260 3,881 3,357 524

Coupon Issuance

January - March 2014 January - March 2014 Fiscal Year to Date

Bill Issuance

January - March 2014 Fiscal Year to Date
874 787 736 661 634 677 712 690 712 666

60%

65%

70%

75%

80%

(400)

(200)

0

200

400

600

800

1,000

2014201520162017201820192020202120222023

% of GDP

$ bn

Fiscal Year

OMB's Projections of Net Borrowing from the Public 

Primary Deficit Net Interest Other Debt Held by

Public as a Percent of GDP - RHS

Debt Held by

Public Net of Financial Assets as a Percent of GDP - RHS

14

OMB’s projections of net borrowing from the public are from Table S-11 of the “Fiscal Year 2014 Mid-Session Review Budget of the US 

Government.” Data labels at the top represent the change in debt held by the public in $ billions. “Other” represents borrowing from the public 

to provide direct and guaranteed loans, in addition to TARP activity.

$ bn %

Primary Deficit 857 12%

Net Interest 4,946 69%

Other 1,348 19%

Total 7,151

FY 2014 - 2023 Cumulative Total
15

OMB’s economic assumption of the 10-year Treasury note rates were developed in late May 2013 and are from Table 2 of the “Fiscal Year 2014 

Mid-Session Review Budget of the US Government.” The implied 10-Year Treasury note forward rates are the averages for each fiscal year.

1.5

2

2.5

3

3.5

4

4.5

5

5.5

2014201520162017201820192020202120222023

10-Year Treasury Note Rate, %

Interest Rate Assumptions:

10-Year Treasury Notes

OMB FY 2014 MSR

May 2013

Implied Forward

Rates as of 12/31/2013

10-Year Treasury Rate,

3.04%, as of 12/31/2013
16

Portfolio & SOMA holdings as of 12/31/2013 and estimated projections of the Large Scale Asset Purchase program, announced on 12/12/2012 

by the Federal Reserve, assumed to last until September 2014 with SOMA redemptions until September 2020. These assumptions are based on 

the Federal Reserve’s December 2013 primary dealer survey and Chairman Bernanke’s June 2013 press conference. Assumes issuance sizes and 

patterns constant for Nominal Coupons and TIPS, as of 12/31/2013, while using average CY 2013 issuance sizes for Bills. Treasury guidance on 

FRN issuance projected individual auction sizes of $10-$15bn. The principal on the TIPS securities was accreted to each projection date based on 

market ZCIS levels. No attempt was made to match future financing needs. Treasury primary dealer survey estimates can be found on page 9. 

OMB’s projections of borrowing from the public are from Table S-11 of the “Fiscal Year 2014 Mid-Session Review Budget of the US 

Government.” CBO’s estimate of the borrowing from the public are from Table 2 of the “An Analysis of the President's 2014 Budget.” See table 

at the end of this section for details.

0

100

200

300

400

500

600

700

800

900

1,000

2014201520162017201820192020202120222023

$ bn

Fiscal Year

Projected Net Borrowing Assuming Future Issuance Remains Constant

Projected Net Borrowing OMB’s Projections of

Borrowing from the Public

CBO's Estimate of the

President's Budget

PD Survey Marketable Borrowing Estimates
17

Impact of SOMA Actions on Projected Net Borrowing Assuming Future 

Issuance Remains Constant

Portfolio & SOMA holdings as of 12/31/2013 and estimated projections of the Large Scale Asset Purchase program, announced on 12/12/2012 

by the Federal Reserve, assumed to last until September 2014 with SOMA redemptions until September 2020. These assumptions are based on 

the Federal Reserve’s December 2013 primary dealer survey and Chairman Bernanke’s June 2013 press conference. Assumes issuance sizes and 

patterns constant for Nominal Coupons and TIPS, as of 12/31/2013, while using average CY 2013 issuance sizes for Bills. Treasury guidance on 

FRN issuance projected individual auction sizes of $10-$15bn. The principal on the TIPS securities was accreted to each projection date based on 

market ZCIS levels. No attempt was made to match future financing needs. Treasury primary dealer survey estimates can be found on page 9. 

CBO’s estimate of the borrowing from the public are from Table 2 of the “An Analysis of the President's 2014 Budget.” See table on next page for 

details

0

100

200

300

400

500

600

700

800

900

1000

2014201520162017201820192020202120222023

Fiscal Year

With Fed Reinvestments ($bn)

Projected Net Borrowing CBO: Change in Debt Held by the Public

0

100

200

300

400

500

600

700

800

900

1000

2014201520162017201820192020202120222023

Fiscal Year

Without Fed Reinvestments ($bn)

PD Survey Marketable Borrowing Estimates
18

Historical Net Marketable Borrowing and Projected Net Borrowing 

Assuming Future Issuance Remains Constant, $ Billion

Portfolio & SOMA holdings as of 12/31/2013 and estimated projections of the Large Scale Asset Purchase program, announced on 12/12/2012 

by the Federal Reserve, assumed to last until September 2014 with SOMA redemptions until September 2020. These assumptions are based on 

the Federal Reserve’s December 2013 primary dealer survey and Chairman Bernanke’s June 2013 press conference. Assumes issuance sizes and 

patterns constant for Nominal Coupons and TIPS, as of 12/31/2013, while using average CY 2013 issuance sizes for Bills. Treasury guidance on 

FRN issuance projected individual auction sizes of $10-$15bn. The principal on the TIPS securities was accreted to each projection date based on 

market ZCIS levels. No attempt was made to match future financing needs. OMB’s projections of borrowing from the public are from Table S11 of the “Fiscal Year 2014 Mid-Session Review Budget of the US Government.” CBO’s estimate of the borrowing from the public are from 

Table 2 of the “An Analysis of the President's 2014 Budget.”

End of Fiscal 

Year

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

Historical Net Marketable 

Borrowing/Projected Net 

Borrowing Capacity

OMB’s Projections 

of Borrowing 

from the Public

CBO's Estimate of 

the President's 

Budget

2009 503 732 514 38 0 1,786

2010 (204) 869 783 35 0 1,483

2011 (311) 576 751 88 0 1,104

2012 139 148 738 90 0 1,115

2013 (86) 86 720 111 0 830

2014 96 (68) 669 88 117 902 874 754

2015 3 (151) 639 87 156 734 787 530

2016 0 (41) 442 67 39 508 736 497

2017 0 (7) 256 68 0 316 661 484

2018 0 35 238 62 0 335 634 507

2019 0 35 104 62 0 201 677 611

2020 0 0 119 35 0 154 712 667

2021 0 68 217 8 1 294 690 667

2022 0 85 225 (6) 0 304 712 695

2023 0 44 184 (7) (0) 221 666 624
Section III:

Portfolio Metrics

19
40

45

50

55

60

65

70

75

80

85

19801982198419861988199019921994199619982000200220042006200820102012201420162018202020222024

Weighted Average Maturity (Months)

Calendar Year

Weighted Average Maturity of Marketable Debt 

Outstanding

Historical Average from 1980 to 2013 Historical Adjust Nominal Coupons to Match Financing Needs

20

Portfolio & SOMA holdings as of 12/31/2013 and estimated projections of the Large Scale Asset Purchase program, announced on 12/12/2012 

by the Federal Reserve, assumed to last until September 2014 with SOMA redemptions until September 2020. These assumptions are based on the 

Federal Reserve’s December 2013 primary dealer survey and Chairman Bernanke’s June 2013 press conference. To match OMB’s projected 

borrowing from the public for the next 10 years, nominal coupon securities (2-, 3-, 5-, 7-, 10-, and 30-year) were adjusted by the same percentage. 

Treasury guidance on FRN issuance projected individual auction sizes of $10-$15bn. The principal on the TIPS securities was accreted to each 

projection date based on market ZCIS levels. OMB’s projections of borrowing from the public are from Table S-11 of the “Fiscal Year 2014 MidSession Review Budget of the US Government.” This scenario does not represent any particular course of action that Treasury is expected to 

follow. Instead, it is intended to demonstrate the basic trajectory of average maturity absent changes to the mix of securities issued by Treasury.

66.7 months on 

12/31/2013

58.6 months 

(Historical Average 

from 1980 to 2013)
21

0

2

4

6

8

10

12

14

16

18

20

2014201520162017201820192020202120222023

$ tr

End of Fiscal Year

Projected Maturity Profile, $ Trillion

< 1yr [1, 2) [2, 3) [3, 5) [5, 7) [7, 10) >= 10yr

Portfolio & SOMA holdings as of 12/31/2013 and estimated projections of the Large Scale Asset Purchase program, announced on 12/12/2012 

by the Federal Reserve, assumed to last until September 2014 with SOMA redemptions until September 2020. These assumptions are based on the 

Federal Reserve’s December 2013 primary dealer survey and Chairman Bernanke’s June 2013 press conference. To match OMB’s projected 

borrowing from the public for the next 10 years, nominal coupon securities (2-, 3-, 5-, 7-, 10-, and 30-year) were adjusted by the same percentage. 

Treasury guidance on FRN issuance projected individual auction sizes of $10-$15bn. The principal on the TIPS securities was accreted to each 

projection date based on market ZCIS levels. OMB’s projections of borrowing from the public are from Table S-11 of the “Fiscal Year 2014 MidSession Review Budget of the US Government.” This scenario does not represent any particular course of action that Treasury is expected to 

follow. See table on following page for details
22

Recent and Projected Maturity Profile, $ Billion

Portfolio & SOMA holdings as of 12/31/2013 and estimated projections of the Large Scale Asset Purchase program, announced on 12/12/2012 

by the Federal Reserve, assumed to last until September 2014 with SOMA redemptions until September 2020. These assumptions are based on the 

Federal Reserve’s December 2013 primary dealer survey and Chairman Bernanke’s June 2013 press conference. To match OMB’s projected 

borrowing from the public for the next 10 years, nominal coupon securities (2-, 3-, 5-, 7-, 10-, and 30-year) were adjusted by the same percentage. 

Treasury guidance on FRN issuance projected individual auction sizes of $10-$15bn. The principal on the TIPS securities was accreted to each 

projection date based on market ZCIS levels. OMB’s projections of borrowing from the public are from Table S-11 of the “Fiscal Year 2014 MidSession Review Budget of the US Government.” This scenario does not represent any particular course of action that Treasury is expected to 

follow. Portfolio Composition by original issuance type and term can be found in the appendix (Page 39).

End of Fiscal 

Year < 1yr [1, 2) [2, 3) [3, 5) [5, 7) [7, 10) >= 10yr Total [0, 5)

2007 1,581 663 341 545 267 480 557 4,434 3,130

2008 2,152 711 280 653 310 499 617 5,222 3,796

2009 2,702 774 663 962 529 672 695 6,998 5,101

2010 2,563 1,141 869 1,299 907 856 853 8,488 5,872

2011 2,620 1,272 1,002 1,516 1,136 1,053 1,017 9,616 6,410

2012 2,889 1,395 1,109 1,847 1,214 1,108 1,181 10,742 7,239

2013 2,939 1,523 1,176 2,031 1,425 1,165 1,331 11,590 7,669

2014 3,150 1,642 1,422 2,200 1,406 1,137 1,524 12,481 8,414

2015 3,273 1,941 1,418 2,323 1,519 1,156 1,659 13,290 8,955

2016 3,475 1,967 1,642 2,424 1,518 1,193 1,832 14,051 9,508

2017 3,598 2,154 1,629 2,536 1,543 1,270 2,015 14,744 9,917

2018 3,785 2,239 1,666 2,631 1,602 1,325 2,167 15,414 10,321

2019 3,770 2,315 1,824 2,668 1,769 1,447 2,338 16,132 10,578

2020 3,954 2,466 1,754 2,884 1,816 1,428 2,588 16,890 11,059

2021 4,100 2,379 1,931 3,029 1,845 1,485 2,862 17,630 11,439

2022 4,013 2,573 2,097 3,126 1,916 1,499 3,170 18,394 11,808

2023 4,207 2,758 2,057 3,150 1,969 1,498 3,476 19,113 12,171
23

Portfolio & SOMA holdings as of 12/31/2013 and estimated projections of the Large Scale Asset Purchase program, announced on 12/12/2012 

by the Federal Reserve, assumed to last until September 2014 with SOMA redemptions until September 2020. These assumptions are based on the 

Federal Reserve’s December 2013 primary dealer survey and Chairman Bernanke’s June 2013 press conference. To match OMB’s projected 

borrowing from the public for the next 10 years, nominal coupon securities (2-, 3-, 5-, 7-, 10-, and 30-year) were adjusted by the same percentage. 

Treasury guidance on FRN issuance projected individual auction sizes of $10-$15bn. The principal on the TIPS securities was accreted to each 

projection date based on market ZCIS levels. OMB’s projections of borrowing from the public are from Table S-11 of the “Fiscal Year 2014 MidSession Review Budget of the US Government.” This scenario does not represent any particular course of action that Treasury is expected to 

follow. See table on the following page for details. Portfolio Composition by original issuance type and term can be found in the appendix (Page 

39).

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2014201520162017201820192020202120222023

End of Fiscal Year

Projected Maturity Profile, Percent

< 1yr [1, 2) [2, 3) [3, 5) [5, 7) [7, 10) >= 10yr
24

Recent and Projected Maturity Profile, Percent

Portfolio & SOMA holdings as of 12/31/2013 and estimated projections of the Large Scale Asset Purchase program, announced on 12/12/2012 

by the Federal Reserve, assumed to last until September 2014 with SOMA redemptions until September 2020. These assumptions are based on the 

Federal Reserve’s December 2013 primary dealer survey and Chairman Bernanke’s June 2013 press conference. To match OMB’s projected 

borrowing from the public for the next 10 years, nominal coupon securities (2-, 3-, 5-, 7-, 10-, and 30-year) were adjusted by the same percentage. 

Treasury guidance on FRN issuance projected individual auction sizes of $10-$15bn. The principal on the TIPS securities was accreted to each 

projection date based on market ZCIS levels. OMB’s projections of borrowing from the public are from Table S-11 of the “Fiscal Year 2014 MidSession Review Budget of the US Government.” This scenario does not represent any particular course of action that Treasury is expected to 

follow. Portfolio Composition by original issuance type and term can be found in the appendix (Page 39).

End of Fiscal 

Year < 1yr [1, 2) [2, 3) [3, 5) [5, 7) [7, 10) >= 10yr [0, 3) [0, 5)

2007 35.7% 15.0% 7.7% 12.3% 6.0% 10.8% 12.6% 58.3% 70.6%

2008 41.2% 13.6% 5.4% 12.5% 5.9% 9.6% 11.8% 60.2% 72.7%

2009 38.6% 11.1% 9.5% 13.7% 7.6% 9.6% 9.9% 59.1% 72.9%

2010 30.2% 13.4% 10.2% 15.3% 10.7% 10.1% 10.0% 53.9% 69.2%

2011 27.2% 13.2% 10.4% 15.8% 11.8% 10.9% 10.6% 50.9% 66.7%

2012 26.9% 13.0% 10.3% 17.2% 11.3% 10.3% 11.0% 50.2% 67.4%

2013 25.4% 13.1% 10.1% 17.5% 12.3% 10.1% 11.5% 48.6% 66.2%

2014 25.2% 13.2% 11.4% 17.6% 11.3% 9.1% 12.2% 49.8% 67.4%

2015 24.6% 14.6% 10.7% 17.5% 11.4% 8.7% 12.5% 49.9% 67.4%

2016 24.7% 14.0% 11.7% 17.3% 10.8% 8.5% 13.0% 50.4% 67.7%

2017 24.4% 14.6% 11.1% 17.2% 10.5% 8.6% 13.7% 50.1% 67.3%

2018 24.6% 14.5% 10.8% 17.1% 10.4% 8.6% 14.1% 49.9% 67.0%

2019 23.4% 14.4% 11.3% 16.5% 11.0% 9.0% 14.5% 49.0% 65.6%

2020 23.4% 14.6% 10.4% 17.1% 10.8% 8.5% 15.3% 48.4% 65.5%

2021 23.3% 13.5% 11.0% 17.2% 10.5% 8.4% 16.2% 47.7% 64.9%

2022 21.8% 14.0% 11.4% 17.0% 10.4% 8.2% 17.2% 47.2% 64.2%

2023 22.0% 14.4% 10.8% 16.5% 10.3% 7.8% 18.2% 47.2% 63.7%
Section IV:

Demand

25
26

*Weighted averages of Competitive Awards.

**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.

Summary Statistics for Fiscal Year 2014 Q1 Auctions

Security 

Type Term Stop Out Rate (%)*

Bid-toCover 

Ratio*

Competitive 

Awards ($ bn)

% 

Primary 

Dealer*

% 

Direct*

% 

Indirect*

NonCompetitive 

Awards ($ bn)

SOMA 

Add Ons 

($ bn)

10-Yr 

Equivalent 

($ bn)**

Bill 4-Week 0.076 3.9 475.4 66.8% 10.2% 23.1% 3.2 0.0 4.3

Bill 13-Week 0.064 4.1 412.4 72.1% 10.1% 17.9% 5.9 0.0 12.2

Bill 26-Week 0.090 4.4 354.4 58.7% 9.8% 31.5% 4.7 0.0 21.2

Bill 52-Week 0.143 4.4 71.3 64.0% 11.4% 24.6% 0.4 0.0 8.4

Bill CMBs 0.180 3.5 81.0 74.7% 8.0% 17.4% 0.0 0.0 1.7

Coupon 2-Year 0.323 3.5 95.3 46.2% 29.5% 24.3% 0.4 0.0 22.3

Coupon 3-Year 0.662 3.4 89.6 47.6% 17.1% 35.4% 0.1 0.0 31.1

Coupon 5-Year 1.413 2.6 104.9 47.8% 11.6% 40.6% 0.1 0.0 58.9

Coupon 7-Year 2.120 2.5 87.0 41.6% 19.0% 39.4% 0.0 0.0 65.7

Coupon 10-Year 2.744 2.6 65.9 38.0% 16.8% 45.2% 0.1 0.0 66.5

Coupon 30-Year 3.822 2.4 42.0 41.5% 17.9% 40.6% 0.0 0.0 87.2

TIPS 5-Year (0.375) 2.5 16.0 41.1% 14.3% 44.5% 0.0 0.0 8.0

TIPS 10-Year 0.560 2.6 13.0 31.8% 21.5% 46.7% 0.0 0.0 14.2

Total Bills 0.085 4.1 1,394.4 66.6% 10.0% 23.4% 14.2 0.0 47.8

Total Coupons 1.576 2.9 484.6 44.4% 18.7% 36.8% 0.7 0.0 331.6

Total TIPS 0.294 2.6 36.0 36.8% 17.8% 45.4% 0.0 0.0 43.7
27

1

1.5

2

2.5

3

3.5

4

4.5

5

5.5

6

Dec-03Dec-04Dec-05Dec-06Dec-07Dec-08Dec-09Dec-10Dec-11Dec-12Dec-13

Bid-to-Cover Ratio

Bid-to-Cover Ratios for Treasury Bills

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

26-Week (13-week moving average) 52-Week (6-month moving average)
28

1.5

2

2.5

3

3.5

4

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Dec-13

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
29

1.5

1.7

1.9

2.1

2.3

2.5

2.7

2.9

3.1

3.3

3.5

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Dec-13

Bid-to-Cover Ratio

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

(6-Month Moving Average)

7-Year 10-Year 30-Year
30

1

1.5

2

2.5

3

3.5

Dec-00Dec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07Dec-08Dec-09Dec-10Dec-11Dec-12Dec-13

Bid-to-Cover Ratio

Bid-to-Cover Ratios for TIPS

5-Year 10-Year (6-month moving average) 20-Year 30-Year
31 Excludes SOMA add-ons. The “Other” category includes categories that are each less than 2%, which include Depository Institutions, Individuals, 

Pension and Insurance.

0%

5%

10%

15%

20%

25%

Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Aug-10

Oct-10

Dec-10

Feb-11

Apr-11

Jun-11

Aug-11

Oct-11

Dec-11

Feb-12

Apr-12

Jun-12

Aug-12

Oct-12

Dec-12

Feb-13

Apr-13

Jun-13

Aug-13

Oct-13

Dec-13

% of Total Competitive Amount Awarded

Percent Awarded in Bill Auctions by Investor Class 

(3-Month Moving Average) 

Other Dealers and Brokers Investment Funds Foreign and International Other
32 Excludes SOMA add-ons. The “Other” category includes categories that are each less than 2%, which include Depository Institutions, Individuals, 

Pension and Insurance.

0%

5%

10%

15%

20%

25%

30%

35%

40%

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

Sep-11

Nov-11

Jan-12

Mar-12

May-12

Jul-12

Sep-12

Nov-12

Jan-13

Mar-13

May-13

Jul-13

Sep-13

Nov-13

% of Total Competitive Amount Awarded

Percent Awarded in 2-,3-,5-Year Nominal Security Auctions by 

Investor Class (6-Month Moving Average)

Other Dealers and Brokers Investment Funds Foreign and International Other
33 Excludes SOMA add-ons. The “Other” category includes categories that are each less than 2%, which include Depository Institutions, Individuals, 

Pension and Insurance.

0%

5%

10%

15%

20%

25%

30%

35%

40%

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

Sep-11

Nov-11

Jan-12

Mar-12

May-12

Jul-12

Sep-12

Nov-12

Jan-13

Mar-13

May-13

Jul-13

Sep-13

Nov-13

% of Total Competitive Amount Awarded

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

by Investor Class (6-Month Moving Average)

Other Dealers and Brokers Investment Funds Foreign and International Other
34 Excludes SOMA add-ons. The “Other” category includes categories that are each less than 2%, which include Depository Institutions, Individuals, 

Pension and Insurance.

0%

10%

20%

30%

40%

50%

60%

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-11

Sep-11

Nov-11

Jan-12

Mar-12

May-12

Jul-12

Sep-12

Nov-12

Jan-13

Mar-13

May-13

Jul-13

Sep-13

Nov-13

% of Total Competitive Amount Awarded

Percent Awarded in TIPS Auctions by Investor Class 

(6-Month Moving Average)

Other Dealers and Brokers Investment Funds Foreign and International Other
35

35%

40%

45%

50%

55%

60%

65%

70%

75%

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Dec-13

% of Total Competitive Amount Awarded

Primary Dealer Awards at Auction, Percent

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

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

TIPS (6-month moving average)

Excludes SOMA add-ons. 
36 Excludes SOMA add-ons. 

0%

5%

10%

15%

20%

25%

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Dec-13

% of Total Competitive Amount Awarded

Direct Bidder Awards at Auction, Percent

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

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

TIPS (6-month moving average)
37 Foreign includes both private sector and official institutions.

0

20

40

60

80

100

120

140

160

180

200

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

Sep-10

Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Dec-13

Monthly Private Award ($bn)

Total Foreign Awards of Treasuries at Auction, $ Billion

Bills 2/3/5 7/10/30 TIPS
Appendix

38
39

Portfolio & SOMA holdings as of 12/31/2013 and estimated projections of the Large Scale Asset Purchase program, announced on 12/12/2012 

by the Federal Reserve, assumed to last until September 2014 with SOMA redemptions until September 2020. These assumptions are based on the 

Federal Reserve’s December 2013 primary dealer survey and Chairman Bernanke’s June 2013 press conference. To match OMB’s projected 

borrowing from the public for the next 10 years, nominal coupon securities (2-, 3-, 5-, 7-, 10-, and 30-year) were adjusted by the same percentage. 

Treasury guidance on FRN issuance projected individual auction sizes of $10-$15bn. The principal on the TIPS securities was accreted to each 

projection date based on market ZCIS levels. This scenario does not represent any particular course of action that Treasury is expected to follow. 

See table on the following page for details.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2014201520162017201820192020202120222023

% of Portfolio

Projected Portfolio Composition by Issuance Type, Percent

Bills 2/3/5 7/10/30 TIPS (principal accreted to projection date) FRN
40

Recent and Projected Portfolio Composition by Issuance Type, Percent

End of Fiscal Year Bills 2-, 3-, 5-Year 

Nominal Coupons

7-, 10-, 30-Year 

Nominal Coupons

Total Nominal 

Coupons

TIPS (principal 

accreted to 

projection date)

FRN

2006 21.3% 40.5% 29.0% 69.5% 9.2% 0.0%

2007 21.6% 38.9% 29.2% 68.1% 10.3% 0.0%

2008 28.5% 34.5% 26.9% 61.4% 10.0% 0.0%

2009 28.5% 36.2% 27.4% 63.6% 7.9% 0.0%

2010 21.1% 40.1% 31.8% 71.9% 7.0% 0.0%

2011 15.4% 41.4% 35.9% 77.3% 7.3% 0.0%

2012 15.0% 38.4% 39.0% 77.4% 7.5% 0.0%

2013 13.2% 35.8% 43.0% 78.7% 8.1% 0.0%

2014 13.0% 32.5% 45.2% 77.7% 8.3% 0.9%

2015 12.3% 29.7% 47.4% 77.0% 8.6% 2.1%

2016 11.6% 28.7% 48.6% 77.3% 8.8% 2.2%

2017 11.0% 28.7% 49.1% 77.7% 9.1% 2.1%

2018 10.6% 28.6% 49.4% 78.1% 9.3% 2.0%

2019 10.1% 29.0% 49.4% 78.4% 9.6% 1.9%

2020 9.6% 29.3% 49.6% 78.9% 9.6% 1.8%

2021 9.2% 29.2% 50.2% 79.5% 9.5% 1.8%

2022 8.9% 29.1% 50.9% 80.1% 9.4% 1.7%

2023 8.5% 29.0% 51.5% 80.6% 9.3% 1.6%

Portfolio & SOMA holdings as of 12/31/2013 and estimated projections of the Large Scale Asset Purchase program, announced on 12/12/2012 

by the Federal Reserve, assumed to last until September 2014 with SOMA redemptions until September 2020. These assumptions are based on the 

Federal Reserve’s December 2013 primary dealer survey and Chairman Bernanke’s June 2013 press conference. To match OMB’s projected 

borrowing from the public for the next 10 years, nominal coupon securities (2-, 3-, 5-, 7-, 10-, and 30-year) were adjusted by the same percentage. 

Treasury guidance on FRN issuance projected individual auction sizes of $10-$15bn. The principal on the TIPS securities was accreted to each 

projection date based on market ZCIS levels. This scenario does not represent any particular course of action that Treasury is expected to follow. 
*Weighted averages of Competitive Awards. 41

**Approximated using prices at settlement and includes both Competitive and Non-Competitive Awards.

Issue Settle Date Stop Out 

Rate (%)*

Bid-to-Cover 

Ratio*

Competitive 

Awards ($ bn)

% Primary 

Dealer* % Direct* % Indirect* Non-Competitive Awards ($ bn)

SOMA Add 

Ons ($ bn)

10-Yr Equivalent 

($ bn)**

4-Week 10/3/2013 0.120 3.09 34.72 71.8% 8.7% 19.4% 0.28 0.00 0.31

4-Week 10/10/2013 0.350 2.75 29.73 60.1% 8.9% 31.0% 0.27 0.00 0.27

4-Week 10/17/2013 0.240 4.33 19.78 64.3% 8.0% 27.6% 0.22 0.00 0.18

4-Week 10/24/2013 0.030 4.31 34.78 76.7% 10.0% 13.3% 0.22 0.00 0.31

4-Week 10/31/2013 0.055 3.78 44.30 69.8% 9.0% 21.3% 0.21 0.00 0.42

4-Week 11/7/2013 0.050 3.90 44.73 61.5% 11.3% 27.2% 0.27 0.00 0.40

4-Week 11/14/2013 0.060 4.08 44.77 62.4% 8.5% 29.1% 0.23 0.00 0.40

4-Week 11/21/2013 0.060 3.86 44.77 65.6% 11.5% 22.9% 0.23 0.00 0.40

4-Week 11/29/2013 0.065 3.78 44.41 61.4% 16.9% 21.7% 0.26 0.00 0.38

4-Week 12/5/2013 0.030 3.94 44.76 68.2% 10.9% 20.9% 0.24 0.00 0.40

4-Week 12/12/2013 0.025 3.94 39.75 65.0% 6.0% 28.9% 0.25 0.00 0.36

4-Week 12/19/2013 0.010 4.13 29.74 78.6% 9.9% 11.5% 0.26 0.00 0.27

4-Week 12/26/2013 0.005 5.02 19.12 65.5% 10.0% 24.5% 0.24 0.00 0.18

13-Week 10/3/2013 0.010 4.57 24.11 72.7% 9.0% 18.3% 0.54 0.00 0.72

13-Week 10/10/2013 0.035 3.88 34.50 72.3% 6.3% 21.4% 0.45 0.00 1.01

13-Week 10/17/2013 0.130 3.13 34.45 82.3% 5.7% 11.9% 0.45 0.00 1.01

13-Week 10/24/2013 0.035 4.03 34.57 78.9% 12.6% 8.5% 0.43 0.00 1.01

13-Week 10/31/2013 0.045 3.89 32.79 77.1% 9.4% 13.5% 0.41 0.00 0.99

13-Week 11/7/2013 0.050 4.14 32.37 71.6% 10.1% 18.3% 0.43 0.00 0.96

13-Week 11/14/2013 0.075 4.55 32.42 70.1% 7.6% 22.3% 0.48 0.00 0.96

13-Week 11/21/2013 0.080 4.00 31.45 82.1% 10.2% 7.7% 0.45 0.00 0.92

13-Week 11/29/2013 0.080 4.30 30.74 57.4% 5.9% 36.7% 0.49 0.00 0.91

13-Week 12/5/2013 0.075 4.49 31.28 65.9% 13.5% 20.6% 0.42 0.00 0.92

13-Week 12/12/2013 0.070 4.33 31.52 76.3% 15.2% 8.5% 0.48 0.00 0.93

13-Week 12/19/2013 0.065 4.52 31.45 66.8% 15.3% 17.9% 0.43 0.00 0.93

13-Week 12/26/2013 0.070 3.99 30.71 60.8% 10.6% 28.5% 0.47 0.00 0.93

26-Week 10/3/2013 0.040 4.67 24.04 51.1% 9.7% 39.2% 0.38 0.00 1.44

26-Week 10/10/2013 0.060 4.40 29.04 33.9% 6.5% 59.5% 0.38 0.00 1.73

26-Week 10/17/2013 0.150 3.52 28.97 66.7% 8.9% 24.4% 0.35 0.00 1.73

26-Week 10/24/2013 0.070 4.45 28.93 57.9% 10.1% 32.0% 0.33 0.00 1.74

26-Week 10/31/2013 0.080 4.22 28.80 54.6% 8.8% 36.6% 0.33 0.00 1.74

26-Week 11/7/2013 0.085 4.45 28.16 50.4% 11.1% 38.5% 0.36 0.00 1.69

26-Week 11/14/2013 0.095 4.46 28.14 62.4% 10.1% 27.5% 0.39 0.00 1.69

26-Week 11/21/2013 0.100 4.40 27.24 66.1% 10.7% 23.2% 0.39 0.00 1.61

26-Week 11/29/2013 0.105 4.19 26.90 66.9% 7.4% 25.7% 0.35 0.00 1.60

26-Week 12/5/2013 0.100 4.82 26.09 62.1% 9.1% 28.8% 0.34 0.00 1.56

26-Week 12/12/2013 0.095 4.64 26.19 64.3% 3.0% 32.8% 0.34 0.00 1.56

26-Week 12/19/2013 0.090 4.44 26.24 64.5% 12.2% 23.2% 0.39 0.00 1.57

26-Week 12/26/2013 0.090 4.29 25.69 58.7% 13.5% 27.9% 0.34 0.00 1.57

52-Week 10/17/2013 0.160 4.12 21.80 70.2% 10.0% 19.8% 0.12 0.00 2.54

52-Week 11/14/2013 0.135 4.44 24.66 60.7% 15.6% 23.6% 0.17 0.00 2.92

52-Week 12/12/2013 0.135 4.48 24.79 61.7% 8.6% 29.7% 0.14 0.00 2.90

CMBs 10/3/2013 0.030 4.37 20.00 80.2% 9.8% 10.1% 0.00 0.00 0.04

CMBs 10/10/2013 0.300 2.84 35.00 84.7% 5.0% 10.3% 0.00 0.00 0.06

CMBs 10/17/2013 0.135 3.83 26.00 56.9% 10.7% 32.5% 0.00 0.00 1.56

Bill Issues
42

*Weighted averages of Competitive Awards.

**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-to-Cover 

Ratio*

Competitive 

Awards ($ bn)

% Primary 

Dealer* % Direct* % Indirect* Non-Competitive Awards ($ bn)

SOMA Add 

Ons ($ bn)

10-Yr Equivalent 

($ bn)**

S 2-Year 10/31/2013 0.323 3.32 31.75 40.0% 31.0% 29.0% 0.14 0.00 7.43

2-Year 12/2/2013 0.300 3.54 31.74 50.3% 27.3% 22.5% 0.15 0.00 7.36

2-Year 12/31/2013 0.345 3.77 31.79 48.2% 30.2% 21.5% 0.11 0.00 7.47

3-Year 10/15/2013 0.710 3.05 29.87 45.8% 19.7% 34.4% 0.02 0.00 10.33

3-Year 11/15/2013 0.644 3.46 29.87 47.3% 19.4% 33.3% 0.03 0.00 10.43

3-Year 12/16/2013 0.631 3.55 29.87 49.6% 12.0% 38.4% 0.03 0.00 10.35

5-Year 10/31/2013 1.300 2.65 34.96 41.9% 12.2% 45.9% 0.02 0.00 19.69

5-Year 12/2/2013 1.340 2.61 34.95 39.2% 10.8% 50.0% 0.04 0.00 19.54

5-Year 12/31/2013 1.600 2.42 34.97 62.4% 11.8% 25.8% 0.03 0.00 19.67

7-Year 10/31/2013 1.870 2.66 28.99 33.8% 23.9% 42.3% 0.01 0.00 22.14

7-Year 12/2/2013 2.106 2.36 28.99 49.8% 16.1% 34.1% 0.01 0.00 21.79

7-Year 12/31/2013 2.385 2.45 28.99 41.2% 17.1% 41.7% 0.02 0.00 21.79

10-Year 10/15/2013 2.657 2.58 20.97 40.2% 21.2% 38.6% 0.02 0.00 21.02

10-Year 11/15/2013 2.750 2.70 23.95 33.8% 18.6% 47.7% 0.05 0.00 24.44

10-Year 12/16/2013 2.824 2.61 20.97 40.5% 10.6% 48.9% 0.03 0.00 21.01

30-Year 10/15/2013 3.758 2.64 12.99 35.5% 22.6% 41.9% 0.00 0.00 26.98

30-Year 11/15/2013 3.810 2.16 15.98 46.5% 18.3% 35.3% 0.02 0.00 33.46

30-Year 12/16/2013 3.900 2.35 13.00 41.4% 12.5% 46.0% 0.00 0.00 26.71

Issue Settle Date Stop Out 

Rate (%)*

Bid-to-Cover 

Ratio*

Competitive 

Awards ($ bn)

% Primary 

Dealer* % Direct* % Indirect* Non-Competitive 

Awards ($ bn)

SOMA Add 

Ons ($ bn)

10-Yr Equivalent 

($ bn)**

5-Year 12/31/2013 -0.375 2.54 15.99 41.1% 14.3% 44.5% 0.01 0.00 8.04

10-Year 11/29/2013 0.560 2.59 12.98 31.8% 21.5% 46.7% 0.02 0.00 14.17

30-Year 10/31/2013 1.330 2.76 6.99 35.9% 19.1% 45.0% 0.01 0.00 21.46

Nominal Coupon Securities

TIPS
43

Treasury Borrowing Advisory Committee

Committee Charge #2

February 4, 2014
44

Committee Charge #2

The U.S. Primary Dealer debt distribution model: benefits and challenges

Treasury has used the Primary Dealer model for auctioning and distributing debt for several 

decades. This highly efficient system has been a key feature for the effective functioning of Treasury 

auctions. Given the evolution of the financial services industry, market structure, regulation and 

technology over recent years, does the current structure for distributing Treasury securities remain 

optimal? Are there any modifications that could result in a lower cost of funding for Treasury and/or 

enhance secondary market liquidity? 
45

Overview of the Primary Dealer System in the U.S.
46

Primary Dealer (PDs) responsibilities.

• To participate consistently in the Fed’s Open Market Operations (OMOs) and to provide market information and analysis 

to the Fed’s trading desk.

• To report on their primary and secondary market activities.

• To place bids in Treasury auctions, to act as agent in auctions for final investors.

• To enhance liquidity in the secondary market by providing firm, two-way continuous pricing.

• To be an advisor to the U.S. Treasury and to help the Treasury market new securities.

• See Appendix C: Standards for Primary Dealer Status.

Most developed nations use a PD system to distribute debt.

• The U.S. issues all public debt in U.S. dollars and typically does so in ‘plain vanilla’ instruments such as conventional 

bonds, bills, inflation-linked bonds (TIPS) and floating rate notes (FRN’s). These conventional securities are all auctioned 

on a uniform price or Dutch Auction basis with competitive auction bids submitted via the TAAPS system. 

• Most European countries use their PD systems to auction conventional bonds, typically on a multi-price format. But in 

Europe there is also issuance in other securities such as ultra-long maturity bonds, zero coupons (Italy and Spain) and 

bonds denominated in foreign currency. Many EU countries prefer syndications for pricing and distributing such nonconventional, less liquid issues. 

• Most PD systems are managed by their respective DMOs.

• The UK uses a PD system to submit competitive bids for conventional bonds via their Gilt-edged Market Makers System 

or GEMMs. Conventional gilts are auctioned using a multi-price format while indexed-linked gilts are auctioned on a 

uniform price basis. Gilt sales in public auctions represent the bulk of UK DMO issuance activity but these sales are 

supplemented by syndicated gilt offerings and mini-tenders.

• Japan instituted a PD system in 2004 and eliminated syndicated issuance in 2006. Like the UK, Japan’s Ministry of 

Finance currently uses a combination of uniform price and multi-price auction formats, depending on the types of 

securities being auctioned.

U.S. Primary Dealer responsibilities and the differences that exist 

between the U.S. and other developed nations
47

The benefits that the U.S. Treasury derives from the Primary Dealer system.

• PDs help develop an auction book and redistribute securities in the primary market process.

• The PD system creates stable and dependable demand for government securities, reducing market refinancing risks for 

the Treasury.

• PDs assist in the development of new products and in new product promotion.

• PDs provide better market access and market intelligence to end users.

• PDs improve the Treasury’s knowledge of the market. 

• PDs promote secondary market liquidity.

The benefits of being a U.S. Primary Dealer.

• There is a cachet value to the status of being designated a PD. Some investors will only trade with PDs in secondary 

market transactions.

• Access to the Fed’s securities lending facility– though the Fed’s new fixed rate, full allotment reverse RP (RRP) program 

has opened the door to non-dealer participants, circumventing the dealers.

• PDs meet regularly with Treasury and are often consulted on market development, market structure, regulatory 

procedures, codes of conduct, etc 

• PDs are a privileged counterpart in the Fed’s open market operations. 

• PDs have the right to submit Indirect bids for customers at auction.

Some of the risks in a Primary Dealer system.

• Moral hazard/”Too Big to Fail” assumptions based on PD status.

• A small number of PDs could lead to collusion.

Benefits derived from the U.S. Primary Dealer system
48

Changes to the U.S. Primary Dealer System Over Time
49

Consolidation in the financial industry has affected the size of the Primary Dealer system.

• In 1988 there were 46 U.S. PDs and today there are 21.

• In 1988 the size of Total Marketable Debt Outstanding was $1.7tn, today it is $11.7tn. 

• Since 1988, the quantity of PDs is less than half but the outstanding debt has multiplied by over 7 times. 

The impact of technology on the Primary Dealer system.

• Web-based auction bidding (via the Treasury Automated Auction Processing System or TAAPS) has 

allowed an increasing number of final investors to bid for auctions directly, circumventing PDs. As such, 

providing secondary market liquidity has become a relatively more important role for PDs versus primary 

market activity.

• PDs transaction capacity has improved due to technology, enhancing their role as primary and 

secondary market liquidity providers.

• The introduction of electronic auction bidding has cut the average time to announce auction results to 

approximately 2 minutes from approximately 30 minutes, reducing the market risks to auction bidders 

while helping to reduce Treasury’s borrowing costs.

Financial industry regulation impacts Primary Dealers.

• Banks dominate the PD ranks and new financial sector regulations have generally restricted bank 

balance sheets and reduced secondary market activities - one factor behind reduced PD participation at 

auctions.

Recent changes in the U.S. Primary Dealer system
50

The benefit to Treasury from the Primary Dealer system changes over time.

• Wider use of the TAAPS system by Direct bidders has reduced the importance of PDs in some 

auctions.

• Increasing automation has improved market ‘price discovery’ for the Treasury, reducing the need for 

PDs as a source of information on market conditions.

• When government financing needs decline, Treasury will rely more on PDs for maintaining secondary 

market liquidity and less for their primary market functions. 

• The Fed’s QE program has reduced the net supply of Treasuries. Once QE ends and net supply 

rises, PDs will have a more important role in their primary and secondary market liquidity support 

functions.

The benefits of being a Primary Dealer have changed over time too. 

• Technology and increasing use of the TAAPS auction processing system by investors (Direct bidders) 

has reduced the benefit to PDs in their role as agents to counterparties in public auctions.

• The wide use of electronic price platforms has reduced the role of PDs as sources of pricing 

information.

• The shift from a multi-price auction format to single price auctions between 1992-1998 reduced the 

role of PDs as ‘price makers’ at auction time. 

• The Fed no longer offers PDs exclusive access to open market operations such as in their new fixed 

rate, full allotment RRP program.

• Treasury has increasing sources of market information outside of the PD system.

Benefits of changes to the Primary Dealer system
51

Effects of changing regulation on Dealer balance sheets

Source: NY Fed

Dealer positioning in corporates ($bn notional) vs. Treasuries ($bn of 10Y equivalents) vs. MBS ($bn notional)

Liquidity in corporate bond markets has fallen due to balance sheet constraints and the 

Volcker rule; the supplementary leverage ratio is likely to hurt liquidity in Treasury markets 

as Primary Dealer balance sheets come under additional pressure
52

Relative Value opportunities for Primary Dealers

0

5

10

15

20

25

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

RMSE of Treasury Par Curve

Year Average RMSE SD RMSE

2004 1.35 0.21

2005 1.12 0.16

2006 1.04 0.14

2007 1.52 0.62

2008 6.25 4.60

2009 5.93 3.71

2010 2.48 0.47

2011 1.35 0.31

2012 1.11 0.19

2013 0.93 0.17

2014 0.95 0.06

• Prior to the crisis: Average RMSE used to be above 1bp

• During the crisis: Severe lack of balance sheet and significant 

deleveraging caused less liquid Tsy product (TIPS, STRIPS, Offthe-runs) to trade at Libor-plus levels, causing the Treasury curve 

to bend out of shape

• Post crisis: QE has put downward pressure on RMSE as the Fed 

has been buying cheap Treasuries. 

• Low RMSE, combined with low market volatility, has reduced the 

attractiveness of RV trading and therefore the value of flow 

information for Primary Dealers

The value of flow information to the Primary Dealer is likely a function of RV opportunities 

available across the Treasury yield curve and market volatility

* RMSE = Root Mean Square Error
53

Areas for Examination
54

• The Federal Reserve, not the U.S. Treasury, formally maintains the PD system, including the 

selection and the evaluation of the performance of PDs semiannually, or more frequently if 

necessary.

• The New York Fed reserves the right to “limit a Primary Dealer’s access to any or all of the 

primary dealer facilities or operations, and may suspend or terminate a primary dealer if it fails 

to meet these behavioral standards of conduct or responsibility.”

Federal Reserve’s needs drive Primary Dealer responsibilities

"The primary dealers serve, first and foremost, as trading counterparties of the 

Federal Reserve Bank of New York (The New York Fed) in its implementation of 

monetary policy. This role includes the obligations to: (i) participate consistently as 

counterparty to the New York Fed in its execution of open market operations to 

carry out U.S. monetary policy pursuant to the direction of the Federal Open 

Market Committee (FOMC); and (ii) provide the New York Fed’s trading desk with 

market information and analysis helpful in the formulation and implementation of 

monetary policy. Primary dealers are also required to participate in all auctions of 

U.S. government debt and to make reasonable markets for the New York Fed 

when it transacts on behalf of its foreign official account-holders.“ – NY Fed http://www.newyorkfed.org/markets/pridealers_policies.html
55

• To the extent that PDs derive benefits from their status, it is essential that both the Treasury 

and the Federal Reserve who ‘pay’ the benefits be explicitly involved in selecting and 

evaluating the performance of PDs.

• The Federal Reserve (not the U.S. Treasury) determines the number of PDs and selects the 

PDs. As a regulator, the Fed may be better positioned to assess and review whether the 

requirements to be a PD are met. However, the number of PDs desired by the U.S. Treasury 

may not the same as those desired by the Fed.

• Underperforming PDs can get a “free ride” from their PD status, making it essential that the 

PD community remain accountable to both the Treasury and the Fed. 

• Treasury may desire to place additional requirements or oversight over the PDs. For example, 

the NY Fed sets general expectations for PD behavior at auction 

(http://www.newyorkfed.org/markets/pridealers_policies.html), but the U.S. Treasury may want 

to set other explicit/specific metrics (see Appendix C).

Treasury’s role in the selection and the evaluation of Primary Dealers 

should be more explicit
56

Treasury should periodically disclose performance evaluations to Primary Dealers.

• Publicizing rankings will help to foster competition among the PD community.

• Competition among PDs to meet their primary objectives benefits the U.S. Treasury. 

Treasury should decide the optimal number of PDs needed to meet their objectives.

• The optimal number of PDs is primarily a function of the size of the debt. Countries with large borrowing needs and/or 

high debt-GDP balances can generally support a larger number of PDs. The DMO’s funding requirements may not be 

larger than the aggregate PDs absorption capacity.

• Most countries with PDs have from 5 to 25 PDs at any one time. 5 PDs appears to be a minimum number to ensure 

competition among PDs and to avoid collusion or moral hazard.

• Too high a number of PDs dilutes the benefits that accrue to PDs, reducing their motivation. There is also less value 

added to the DMO as the PDs customer bases overlap and the management of a large number of PDs can become 

an administrative burden to the DMO. 

• Both the U.S. Treasury and the Fed must evaluate the ongoing quality of PD performance to assess whether the PD 

group is appropriately sized and well balanced with complementary skills sufficient to meet all stated objectives.

• Setting the bar for attaining Primary Dealer status too high risks reducing the ranks of PDs, hurting competition that 

the Treasury and the Fed need for attaining their objectives.

Treasury should consider how to make its role more explicit
57

See Appendix A for the evolution of direct bidder behavior.

• The Direct bidding process offers those bidders with TAAPS access anonymity and ease in placing 

their bids. This has lead to increased Direct bidder auction participation.

• PDs are expected to show consistent demand for all Treasury auctions. The increased use of Direct 

bids during auctions gives PDs a ‘dirtier lens’ through which they assess auction prospects. This 

could potentially reduce PDs demand in auctions because of increased auction uncertainty.

• PDs are required to bid in all government securities auctions and the New York Fed evaluates PD 

auction performance on an ongoing basis. Direct bidders have equal access to the TAAPS system 

as PDs yet there are no apparent requirements for Direct bidders to maintain TAAPS access. 

Impact of Direct bidding

“Entities permitted to submit bids directly include, but 

are not limited to, primary dealers, other brokers and 

dealers (non-primary), various types of investment 

funds (for example, pension, hedge, mutual), 

insurance companies, depository institutions 

(banks), foreign and international entities 

(governmental and private), the Federal Reserve 

(System Open Market Account), and individuals.” 

–Treasury Direct’s FAQ page (see Sources) 

“Any entity or individual may bid directly as long as the 

entity or individual has made all the necessary 

arrangements for access to TAAPS and has made proper 

arrangements for delivery and payment for auction 

awards. For entities or individuals that do not have a funds 

and securities account with the Federal Reserve, payment 

is arranged through an autocharge agreement.” 

–Treasury Direct’s FAQ page (see Sources)
58

Creating a more balanced environment among auction bidders.

• Treasury could put upper thresholds on Direct bidder auction allotments though this may result in 

reduced auction participation. 

• Another consideration would be minimum auction participation thresholds (nominal terms, possibly as 

a % of capital or AUM) over a defined time period.

• Greater disclosure on Direct bidder participation.

Should Treasury increase transparency in regards to direct bidding? The current 

disclosure is vague.

• Direct bidding is a privilege. Standards of conduct should be reviewed, updated and made public to 

foster greater and more consistent bidding activity from Direct bidders.

• Direct bidders have to fill out a 3-page U.S Treasury Auctions Submitter Agreement (OMB number 

1535-0137). Those without a securities and funds account in the Federal Reserve System have to fill 

out a 6 page Autocharge Agreement with the Treasury.

Primary Dealers are the dominant bidder class in Treasury auctions. The Treasury and the Fed 

incentivize PDs to support the auctions. Indirect bidders provide information to PDs about the auction 

process. As more institutions bid Direct, auction uncertainty rises for the PD system which could 

potentially lead to increased debt funding costs. Should the privilege of Direct bidding come with more 

requirements and transparency? Requirements should be set that induce consistent Direct Bidder 

participation over the longer term. 

Direct bidder considerations
59

Treasury may want to consider giving Primary Dealers the opportunity to add-on a 

percentage of their awarded bids at the original auction price.

• The Greenshoe Option gives the dealer the ability to add-on a percentage (eg 10%) of their awarded 

bids, at the original auction price. Other DMO's allow from 2 hours (UK) to 5 days (Belgium) for PDs to 

exercise this option. The maximum non-competitive allocation after the auction is 30% of total for new 

bonds issued by Italy.

• This is currently done in various manners in the UK, Austria, Belgium, France, Italy, the Netherlands, 

and Spain (among others). 

• The add-on amount is generally based on the successful bids at the relevant auction. One alternative 

can be to use a 4- or 6-auction trailing average of successfully accepted bids in that maturity.

• A DMO should be indifferent between issuing X or X*1.1 within a small window, at the same funding 

rate. In other words, the sale of the option to the PD is of limited cost to the DMO because the DMO is 

subject to an issuance calendar and they would not opportunistically issue within the option window in 

any case (the DMO could not have taken advantage of the subsequent lower yields; there is no 

opportunity cost). This changes the longer the add-on window is open, however.

• A cost could come from potentially undermining demand if there is an unknown additional supply 

lurking. This could be ameliorated by the fact the percentage of additional award will be known well 

ahead of time. But the Greenshoe option may be inappropriate as/if U.S. debt limit thresholds are 

neared because Treasury needs to be exacting in their issuance levels at time such times. 

• On the other hand, the non-comp Greenshoe option auction process awards market participants for a 

successful auction and motivates PDs to see successful placement of primary issuance. The DMO 

benefits from more aggressive bidding in the initial auction.

• If the option is regularly exercised, Treasury can reduce bill issuance in lieu of the Greenshoe coupon 

issuance, fulfilling the desire to extend the average maturity of the outstanding debt. If all add-on's are 

exercised, there is room to reduce bill supply in lieu of coupons, given current forecasts.

The “Greenshoe” Option
60

The mechanics of syndications and their popularity in the developed world. 

• DMO appoints a small group of joint-book running managers to interface with the market and assume underwriting liability for the offered 

securities.

• Syndicate builds an order book of investor demand at a starting price recommended by lead-managing broker-dealers.

• Syndicate adjusts pricing range to determine the clearing level for DMO’s target size.

• Syndicate allocates securities to investors at the market-clearing price.

• Practice is favored generally by countries with lower issuance needs, but also used in certain circumstances by the United Kingdom, Italy, France, 

and Germany.

• Germany uses syndications for the first ever issuance of a new federal security.

• Primary method of new-issue distribution for other U.S. securities, including GSE benchmark bullets, investment grade corporate bonds, high 

yield bonds, and equities.

Benefits of the syndication process.

• Increases certainty of execution.

• Enables price discovery and greater transparency for market participants.

• Facilitates a uniform-price clearing mechanism at a price that matches investor demand.

• Provides a competitive incentive for book running managers, through underwriting commissions and status, to find marginal buyers.

• Fulfils the edict of “regular and predictable” borrowing, if syndications are announced in the quarterly calendar of issuance.

• Allows a broader distribution of new issues.

• Syndication may be an effective distribution tool in the issuance of a new Treasury product, where price discovery and execution certainty will be 

critical.

• Syndications are more likely to be a benefit in situations where the investor base is less certain and the pricing benchmarks are less clear.

• For example, Treasury securities with maturities greater than 30 years, foreign currency-denominated issues, or potentially longer-dated FRNs.

Additional considerations for the U.S. Treasury on syndications. 

• Requires a syndicate to be selected by Treasury and compensated for underwriting liability.

• Incorporates syndicate discretion into the investor allocation process.

• Exposes Treasury to market movements across a multi-hour or multi-day execution window.

• Participating investors agree to accept the universal price offered by the book running managers.

• Decision to allocate to a buyer is a made by the syndicate, rather than by the buyer’s marginal price.

• Enables market psychology to affect the pricing outcome, EG: investors may be “spooked” by a slow book-building process or price widening.

• Incentivizes PDs to perform against their metrics to be chosen as a syndicate manager.

Syndication
61

Syndication Practices Globally

Syndication is a common practice Syndication is more common among smaller countries
62

Appendix A: Analysis of auction data and Direct bidder patterns
63

Although auction demand has increased across the board in the 

past few years...

2.59

2.34 2.32

1.90

2.30

2.44 2.49

3.01 2.97

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

1991-19951996-19992000-20012002-20032004-20052006-20072008-20092010-20112012-2013

Bid/Cover Weighted Average - All Products
64

...the higher risk and/or lower liquidity sectors have not benefited 

quite as much as the other sectors, as evidenced by smaller 

bid/cover ratios...

Bid to cover ratios have been increasing over the past decade for all products, especially 2Y Treasuries...

...with 30Y auctions and TIPS witnessing the smallest increase.

2.66

2.32 2.44

1.89

2.19

2.60 2.66

3.35 3.57

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

1991-1995 1996-1999 2000-2001 2002-2003 2004-2005 2006-2007 2008-2009 2010-2011 2012-2013

Bid/Cover Weighted Average - 2Y

2.28 2.31

2.07 2.07

2.36

2.66 2.52

0.00

0.50

1.00

1.50

2.00

2.50

3.00

Bid/Cover Weighted Average - 30Y

3.04

2.26 2.15 1.91 2.00

2.35

2.76 2.60

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

Bid/Cover Weighted Average - TIPS
65

...and larger auction tails

Similarly, average tail has been negative for 2Y Tsys, and positive for 30Y / TIPS.

0.06 0.07

-0.42

-0.02

-0.14

-0.22

-0.42

-0.15

-0.01

-0.50

-0.40

-0.30

-0.20

-0.10

0.00

0.10

1991-1995 1996-1999 2000-2001 2002-2003 2004-2005 2006-2007 2008-2009 2010-2011 2012-2013

Tail Weighted Average - 2Y

1.01

3.15

-0.31

2.49

0.71

0.24

-0.50

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

Tail Weighted Average - 30Y

-0.06

1.73

-0.24

1.44

0.40

-0.77

0.09

0.81

-1.00

-0.50

0.00

0.50

1.00

1.50

2.00

Tail Weighted Average - TIPS
66

Primary Dealers have played a smaller role in auctions in recent years, but 

less so in the long end. This suggests that dealer participation is required 

more at the long end given lower liquidity in this sector

Overall proportion of dealer participation has declined from 68% in 2006-07 to 46% in 2012-13...

...but in the 30Y sector it has declined from 60% to 49%.

60%

55%

49% 49%

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

2006-2007 2008-2009 2010-2011 2012-2013

Dealer % Weighted Average - 30Y

25%

58%

68%

58%

48% 46%

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

2002-2003 2004-2005 2006-2007 2008-2009 2010-2011 2012-2013

Dealer % Weighted Average - All Products
67

Direct bidders have been replacing Primary Dealers in virtually all 

auctions, but less so in TIPS. This suggests that of the current suite 

of products that Treasury offers, TIPS may be best suited for a 

syndication type structure

Overall proportion of direct bidders has increased from 1% in 2006-07 to 16% in 2012-13...

...but for TIPS the proportion has increased from 1% to 12%

2%

1%

4%

13%

16%

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

0.18

2004-2005 2006-2007 2008-2009 2010-2011 2012-2013

Direct % Weighted Average - All Products

1%

3%

10%

12%

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

2006-2007 2008-2009 2010-2011 2012-2013

Direct % Weighted Average - TIPS
68

Appendix B: Global Issuance Recap and Other Considerations
69

Appendix B: Global issuance recap

Global Issuance Recap

Debt Instrument Maturity Auction Type Auction Timeline Syndicated

Taps /

Mini-Tenders Buybacks / Switches

U.K.

Conventional Gilt 2 years – 50 

years

Multiple-price auction Announcement: Tuesday of the 

previous week; Auction: 30-yr issued 

quarterly, 5-year and 10-year issued

1st and 3rd month of the quarter; 

Settlement: 3 business days

after transaction

Yes: GBP5Bn

50-yr done

on 6/2013, (GBP 

3.5Bn more in 

conventional gilts 

to come for FY 

2013)

Tap: Yes, but none 

since April 1996;

Mini-tenders:

~GBP 2Bn sales

to date

Buybacks of 6 or fewer months 

remaining to maturity to smooth 

maturity peaks; Switches on an

ad-hoc basis, last one done 

2001 in Treasury stock

Index-Linked Gilt 5 years – 50 

years

Single-price auction Announcement: Tuesday of the 

previous week; Auction: Monthly with 

varying maturities; Settlement: 3 

business days after transaction

Yes: GBP 

12.5Bn planned 

for FY 2013

Tap: Yes, but none 

since November 

1998; Mini-tenders: 

~GBP 750MM sales 

to date

Switches on an ad-hoc basis,

Last one done 2001

Other Products Treasury Bills, Double-dated Gilts and Undated Gilts (both not in circulation currently); DMO provides a Post Auction Option Facility (PAOF) for successful 

bidders at all auctions to have the option to acquire up to an additional 10% of the total gilts they were allotted at the average accepted price of the 

auction; Last reverse gilt auction in 2001

Japan

JGB 2 years – 40 

years

Competitive price 

auction (2-year, 5 

year, 10-year,

20-year, 30-year); 

Competitive yield 

auction / Dutch (40-

year)

Announcement: About a week before 

auction at 10:30AM; Auction: Bidding 

closes at 12PM, 2-year issued

end-month, 5-year issued mid-month,

10-year issued beginning of month, 

Issuance times of longer-maturity 

bonds vary; Settlement: 2 – 3 

business days following auction

Yes: Not since

the 1990’s

Not ad-hoc but two

tap auctions per 

month (JPY300Bn in

5-year – 15-year and 

in 15-year – 30-year); 

Mini-tender: No

Buybacks done on a monthly 

basis, recently focused on 

Linkers and Floaters; No 

switches

Inflation-Indexed 

Bonds

10 years None specified None specified No Tap: No;

Mini-tender: No

Buybacks recently targeted in 

10-yr Inflation-linked and 15-yr 

Floaters

Other Products 5 – 10-yr auctions also issued through non-competitive auctions for smaller bidders; OTC sales system of 2-yr, 5-yr, 10-yr JGBs, price determined by MOF 

for each issue, max value of JPY100 per individual applicant, monthly OTC sales; Also issue Floating Rate Bonds

Germany

Schaetze,

Bobl, Bund

Schaetze: 2-

year, Bobl: 5-

year, Bund:

10- and 30-year

Multiple-price auction Announcement: 6 business days prior 

to auction; Auction: Wednesdays at 

11:30AM; Settlement: 2 business 

days following the auction

No Tap: Yes, usually

only off benchmarks; 

Mini-tender: No

Buybacks on a daily, ad-hoc 

basis in the secondary market 

(no announcements beforehand, 

no post-trading data); Switches 

on an ad-hoc basis

Bobl / EI,

Bund / EI

Bobl / EI: 5-

year,

Bund / EI: 10-

year

Multiple-price auction Announcement: Flexible; Auction: 

Wednesdays at 12:00PM

Yes: only for first 

issuance and

first reopening

Tap: Yes, more 

sporadically than 

Bund / Bobl taps; 

Mini-tender: No

Buybacks on a daily, ad-hoc 

basis in the secondary market 

(no announcements beforehand,

no post-trading data); Switches 

on an ad-hoc basis

Other Products Foreign currency bonds, Federal Savings Notes; Bunds are strippable

Source: OECD, National Central Banks, National Debt Management Offices
70

Appendix: Global issuance recap (Cont’d)

Global Issuance Recap (cont’d)

Debt Instrument Maturity Auction Type Auction Timeline Syndicated

Taps /

Mini-Tenders Buybacks / Switches

Italy

CTZ, BTP CTZ: 2-year; 

BTP:

3-year – 30-

year

Single-price 

auction

Announcement: 2 business days prior to 

auction; Auction: 2-year at end of month, 2-year issued mid-month,

5-year and 10-year issued end of month; Settlement: 3 business days following the 

auction

Yes: EUR15Bn 15-

yr in January 2013; 

EUR6Bn 30-yr in

May 2013

Tap: Yes, off

off-the-runs

more regularly;

Mini-tender: No

Buybacks and Switches on an

ad-hoc basis

CCTeu (FRN), 

BTP€I (Linker)

CCTeu: 5-year,

BTP€i: 5-year 

to

30-year

Single-price 

auction

CCTeu: Announcement: 2 business days 

prior to auction; Auction: End of most 

favorable month; Settlement: 2 business 

days following the auction; Announcement: 

2 business days prior to auction; BTP€i: 

Auction: End of month together with CTZ 

auction; Settlement: 3 business days 

following the auction

None in 2012 –

2013 but BTP Italia 

deal

this year (see 

Other Products 

section)

Tap: Yes, CCTeu 

fairly regularly and 

Linkers more 

sporadically; Minitender: No

Beginning June 2010, MEF 

offered opportunity to exchange 

current CCTs with new CCTeu

Other Products BTP Italia (Inflation-Linked Bonds): EUR17Bn syndicated deal in 2013; Bonds over 5 years are strippable

France

BTAN, OAT BTAN: 2 years 

–

5 years; OAT:

7 years to 50 

years

Multiple-price 

auction

Announcement of BTAN and OAT: 4 

business days prior to auction; BTAN 

Auction: 3rd working Thursday of each month at 10:50AM; OAT auction: 1st

working Thursday of each month at 

10:50AM; Settlement of BTAN and OAT: 

Tuesday following the auction

Yes: EUR4.5Bn of

30-yr OAT done on 

May 25, 2013 

(usually 1 

syndication in the 

long end each 

year)

Tap: Yes, 

sporadically, more 

frequently for

30-year bonds than 

for shorter paper;

Mini-tenders: No

Buybacks daily,

Switches on an ad-hoc basis

OATi, OAT€I 

(Inflation Linked)

≥ 7 years Multiple-price 

auction

Announcement: 4 business days prior to 

auction; Auction: 3rd working Thursday of 

month at 11:50AM; Settlement: Tuesday 

following the auction

Yes: sporadic, 

EUR3bln of 15yr in 

2008

Tap: Yes, 

sporadically; Minitenders: No

Buybacks on an ad-hoc basis

Other Products Floating rate OAT Bonds: TEC 10 OAT (last matured in 2009, none in circulation currently), OATs and BTANs are strippable

Canada

Nominal Bond 2-year to 30-

year

Multiple-price 

auction

Announcement: Week prior at 3:30PM; 

Auction: Usually on Wednesday by 

12:00PM; Settlement: 2 business days for 

2- and 3-year bonds; 3 business days for 

5-, 10-, and 30-year bonds

Yes: not since 

1991

Tap: No;

Mini-tenders: No

Buybacks and switches done 

regularly; bond buybacks done 

once or twice a quarter, target 

off-the-runs (12 months – 25 

years); cash management 

buybacks (under 18 months) 

done weekly; Switches quarterly 

in 2-yr paper, less frequently in 30s

Real Return 

Bond

30-year Single-price 

auction (as 

scheduled for the 

9/5/2013 30-yr 

auction)

Announcement: Week prior at 3:30PM; 

Auction: Usually on Wednesday by 

12:05PM; Settlement: 3 business

days after auction 

Yes: sporadic; 30-

yr deal in the mid 

1990’s

Tap: No;

Mini-tenders: No

No buybacks nor switches

Other Products Canadian Savings Bonds, Canadian Premium Bonds, Foreign currency funding (syndicated offerings)

Source: OECD, National Central Banks, National Debt Management Offices
71

• Most countries with PDs have anywhere from 5 to 25 PDs at any one time. 5 PDs appears to be a minimum 

number to ensure competition among PDs and to avoid collusion or moral hazard. A large number of PDs can 

dilute the benefits that accrue to PDs; benefits that are critical in inducing PDs to perform the responsibilities. 

Countries with large borrowing needs and/or high debt-GDP balances can generally support a larger number of 

PDs. 

• The PD system in the U.S. appears well-suited to the mix of securities now being auctioned by Treasury. Other 

G-7 countries use syndications to sell less conventional securities like foreign-denominated bonds and ultra-long 

instruments. If Treasury decides to issue unconventional securities to further diversify their investor base, then 

syndications should be considered. 

• Syndicated deals in the EU are typically timed for periods when institutions tend to be cash rich. Since Treasury 

is a frequent borrower and auction statistics tend to be consistent over time, seasonal syndicated deals do not 

appear necessary in the current environment. 

• Most EU countries come with 1-3 syndicated deals per year. Since Treasury likes to be a consistent and 

reliable borrower, periodic and/or opportunistic syndicated deals would not fit Treasury’s stated goals. 

• The UK supplements gilt auction sales with other distribution methods such as syndications (long-dated gilts 

and index-linked gilts), mini-tenders (to supplement shortfalls in syndications) and their Post Auction Option 

Facility or PAOF (which allows auction bidders to acquire up to an additional 10% of their auction allocation 

within a 2 hour period after each auction). Treasury often adjusts T-Bill issuance to changing cash flow needs so 

such ‘top-up’ schemes are generally not needed.

• In Japan most JGB’s are sold via competitive price auctions; the last syndicated JGB deal was in the 1990’s. 

Some JGB auctions are non-competitive and designed for retail investors (minimum of JPY 10,000 and no 

upper limit) and Japan also has an OTC sales system for 2yr, 5yr and 10yr maturities where the price is set by 

the MOF and where there is a maximum allotment of JPY100 mln per individual application. 

Global Comparison
72

Appendix C: Standards for Primary Dealer Status
73

• PDs must be an SEC-registered and supervised broker-dealer or a U.S.-chartered bank subject to official 

supervision by bank supervisors.

• A registered broker-dealer must have at least $150mln in regulatory net capital and they must be in 

compliance with all capital or other regulatory requirements imposed by either the SEC or other selfregulatory organization or SRO. 

• A bank must meet the minimum Tier I and Tier II capital standards under the applicable Basel Accord and 

they must have at least $150mln of Tier I capital under the applicable Basel Accord guidelines.

• An aspiring PD (either broker-dealer or bank) must have been in business for at least a year prior to 

application.

• PDs must have sufficient scale and experience in their back office to confirm and manage transactions with 

the New York Fed. 

• PDs must also clear through one of the U.S. clearing organizations that have a clearing relationship with the 

New York Fed. PDs must also have agreements in place with the clearing organization to transact in triparty 

reverse/repo operations. 

• PDs must be a participant in central counterparty services such as DTCC, FICC and GSD.

• PDs must have a “robust” business continuity plan, including an alternate site staffed by trained 

professionals in clearing. 

• PDs must maintain a robust compliance program. The New York Fed reserves the right to consult with 

relevant bank supervisors or the SEC on the firm’s control environment. 

• Under the Primary Dealers Act of 1988 the New York Fed may deny the application of a foreign, prospective 

primary dealer if it is deemed that the applicant’s country of domicile does not provide U.S. counterparts with 

equal access to underwriting and distribution of government debt. 

• PDs must file weekly FR 2004 reports on outright positions, transactions and financing and fails in Treasury 

and other marketable debt securities. PDs must report daily transactions in when-issued (WI) securities via 

the FR 2004WI report. 

Standards for Primary Dealer status 
74

Sources

• “Primary Dealers in Government Securities: Policy Issues and Selected Countries’ Experience,” Marco 

Arnone and George Iden, IMF Working Paper, Monetary and Exchange Affairs Dept., March 2003

• “Primary Dealer Systems,” Gemloc Advisory Services, The World Bank, March 2010

• “UK Government Securities: a Guide to ‘Gilts’,” United Kingdom Debt Management Office, 10th edition, 

June 2012

• “A primer on Euro area government debt markets,” J.P. Morgan European Rates Strategy, June 29 2012

• “Primary Dealers’ Waning Role in Treasury Auctions,” Federal Reserve Bank of New York, Liberty Street 

Economics, http://libertystreeteconomics.newyorkfed.org/2013/02/primary-dealers-waning-role-in-treasuryauctions.html

• “Administration of Relationships with Primary Dealers,” Federal Reserve Bank of New York, 

http://www.newyorkfed.org/markets/pridealers_policies.html

• “Auction Frequently Asked Questions,” U.S. Treasury, 

http://www.treasurydirect.gov/instit/research/faqs/faqs_auct.htm#who