Treasury Borrowing Advisory 

Quarterly Refunding 

November 4, 2003
TBAC Quarterly Mee

November 2003

I. Long-Term FinancinII. TIPSIII. Market Conditions IV. Financing This Quar
Long-Term Financin

We will show you a few charts that projections of our future financing nour current issuance calendar. We the Committee’s advice on whether financing calendar provides sufficiegiven the current fiscal outlook. If tCommittee views the current calendinsufficiently flexible to meet the ranprojections shown, what recommenthe Committee have for changing thand when should these recommendimplemented?
 Treasury Financing Requirements

($ Billions)

 (Projected) (Actuals) 

Deficit Funding (Def + / Surplus -) * 138 103 

Means of Financing

Change in Cash Balance -15 -5 Compensating Balances 28 28 Net Non-Marketable Financing 16 8 Net Marketable Financing 104 82 Other 5 -10 

Net Marketable Financing 104 82 

Bills -10Nominal Notes 86IIS 11Bonds -6

Notes:Starting Cash Balance 30 30 Ending Cash Balance 45 35 

* Includes budget results, direct loan activity, changes in accrued interest and checks outstanding and minor miscellan

Note: Totals may not add due to rounding

 July - September 2003 
Financing Residuals Given Current Issuance 

-300-200-100

0

100200300400500600700

2004 2005 2006 2007 

Fiscal Year

$ billions

FY04 OMB MSR Deficit Forecast

Deficits plus 

Avg. Absolute Error

Deficits minus Avg. Absolute ErrorBars Indicate Additional Financing Required In Given Year For Different Deficit Outcomes
CBO Baseline Budget Projections With Policy 

-800-700-600-500-400-300-200-100

0

100200300

2004 2005 2006 2007 2008 2009 2010 2

Fiscal Year

$ billions

CBO August Baseline Extend Expiring Tax ProvisionsReform Alternative Minimum Tax Reform Medicare/Prescription BIncrease Discretionary Appropriations by Growth Rate of Nominal GDP Afghan. & Iraq Supplemental Re

-583

-453 -457

-482

-516 -537 -559

-5

Source: CBO, The Budget and Economic Outlook, August 2003

Net Deficit Projection
Outlays and Receipts as a Percentage o

15%16%17%18%19%20%21%22%23%24%25%

1960 1965 1970 1975 1980 1985 1990 1995 

OMB's MSR Outlays CBO Baseline Outlays CBO Policy OOMB's MSR Receipts CBO Baseline Receipts CBO Policy R

Average Historical Difference: 2%

Sources: OMB, FY ’04 Budget Historical Tables; OMB, MSR, July ‘03; CBO, The Budget a
Projected Average Announced Auction S

 (CBO Policy plus Afghan & Iraq Suppleme

Note: Projected auction sizes are hypothetical. Assumes no changes in auc

05

10152025303540

Bills 2-year 3-year 5-year 10

$ billions
Annual Issuance as a Percentage of GD

Percentage of Debt Maturing in 12 Mo

8%

10%12%14%16%18%20%22%24%

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 

Issuance/

GDP

Issuance as a % of GDP (LH

% of Debt Maturing in 12 Months (RHS) 

* Projections assume current coupon auction sizes remain the same and remaining borrowing needs are fin** Nominal GDP growth of 5% is assumed for Issuance as a Percentage of GDP measure.*** Debt Maturing and Issuance include Fed holdings. Issuance is composed of coupon issuance plus bills 
Long-Term Issuance 

as a Percentage of Total Annual Issua

5%6%7%8%9%

10%11%12%

1981 1983 1985 1987 1989 1991 1993 1995 1997 19

* Long-Term issuance is any issuance with a maturity of 10 years or greater.** Total Annual Issunace is composed of all coupon issuance over the previous four quarters plus bills outs*** Projection is calculated using current auction sizes and the OMB's July '03 MSR deficit forecast for FY0

average:8.3%
Treasury Inflation-Protected 

We are currently considering addinadditional TIPS security to our financalendar. What criteria should we udetermining the appropriate maturitissue? 
Total Annual Issuance of TIPS 

Nominal Amounts and as a Percentage of Annual Is

0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%

1997 1998 1999 2000 2001 2002 

calendar year

percent

Percentage of Total Issuance (LHS)

Annual Issuan

FY '

(with cu

* Annual Issuance equals total TIPS issuance over the previous four quarters.** Total Annual Issuance is composed of all coupon issuance over the previous four quarters plus bills outst*** FY '04 Projections based on current auction sizes and the OMB's Jul

y '03 MSR deficit forecast for FY '04 
2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035

0

1

2

3

4

5

6

coupon equivalent yield (bills)

bank discount rate (bills)

yield to maturity

yield to first call (price > par)

yield curve fitting points

pre-auction quote (w.i. trading)

inflation-indexed security

0

1

2

3

4

5

6

TREASURY BID YIELD CURVE COB: 10-28-2003, Tuesday 
Treasury Securities 

as a Percentage of the Financial Assets Held in P

0%5%

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

1960 1965 1970 1975 1980 1985 1990 

Privat

Source: Federal Reserve Board, Flow of Funds; Haver
Treasury Securities 

as a Percentage of the Financial Assets Held by Insura

0%5%

10%15%20%25%

1960 1965 1970 1975 1980 1985 1990 

Source: Federal Reserve Board, Flow of Funds; Haver

Life Insuranc

Total
Treasury Securities 

as a Percentage of the Financial Assets Held in 

0%2%4%6%8%

10%12%14%16%18%20%

1960 1965 1970 1975 1980 1985 1990 

 Nearly $15 billion held in TIPS Mutual Funds today Compared with less than $1 billion at the end of 2000

Source: Federal Reserve Board, Flow of Funds; Haver 
Market Conditions

RP fails, particularly on the May ‘13 note, persist at an elevated level. Wthe Committee’s feedback on curreconditions and how effective private initiatives and regulatory measures handling the fails situation. 
Overnight RP and 10-year Treasury Ra

0%1%2%3%4%5%6%7%8%9%

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 

Source: Bloomberg

10-year

Ov
May 10-year Note Fa

• Not much improvement over past two • Spillover into cash market has been • No signs that overall liquidity has bee• No improvement forecasted in near t
Financing This Quart

We would like the Committee’s advice on th• The composition of Treasury notes to refu

approximately $24.8 billion of privately hebonds maturing on November 15 (includiof the 8-3/4% 11/15/03-08 that was called 

• The composition of Treasury marketable 

the remainder of the October-December qincluding cash management bills.

• The composition of Treasury marketable 

the January-March quarter.