Treasury Presentation to TBAC
Office of Debt Management

Fiscal Year 2018 Q2 Report
Table of Contents

2

I. Executive Summary p. 4

II. Fiscal

A. Quarterly Tax Receipts p. 6

B. Monthly Receipt Levels p. 7

C. Largest Outlays p. 8

D. Treasury Net Nonmarketable Borrowing p. 9

E. Cumulative Budget Deficits p. 10

F. Deficit and Borrowing Estimates p. 11

G. Budget Surplus/Deficit p. 12

III. Financing

A. Sources of Financing p. 15

B. OMB’s Projections of Net Borrowing from the Public p. 17

C. Interest Rate Assumptions p. 18

D. Projected Net Marketable Borrowing Assuming Future Issuance Remains Constant p. 19

IV. Portfolio Metrics

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

B. Maturity Profile p. 23

V. Demand

A. Summary Statistics p. 25

B. Bid-to-Cover Ratios p. 26

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:

Executive Summary

3
Receipts and Outlays

• Receipts totaled $1,497 billion in 1H FY 2018, $24 billion (2%) higher than last year. Withheld Income and FICA taxes increased by $47 

billion (4%) year-over-year, reflecting growth in both employment and wages. Non-withheld Income and SECA taxes increased by $11 

billion (7%) over the same timeframe. Partially offsetting these increases, gross corporate taxes were $14 billion (11%) lower than last 

year. 

• Outlays totaled $2,097 billion in 1H FY 2018, $97 billion (5%) higher year-over-year. After calendar adjustments, outlays were $103 

billion (5%) higher than the comparable period last year. Department of Treasury outlays were $32 billion (10%) higher, due to increased 

interest on the public debt and payments made to the GSEs in March. Adjusted Social Security Administration outlays increased by $19 

billion (4%), due to increases in program enrollment and the average benefit payment. Adjusted Health and Human Services outlays 

were $16 billion (3%) higher, due to increases in Medicare. Department of Homeland Security outlays were $15 billion (61%) higher, due 

to increased payments for disaster relief. Fiscal year to-date outlays were 21.1% of GDP, unchanged from the same period last year.

Sources of Financing 

• Based on the Quarterly Borrowing Estimate, Treasury’s Office of Fiscal Projections (OFP) currently estimates a net privately-held 

marketable borrowing need of $75 billion for Q3 FY 2018, with an end-of-June cash balance of $360 billion. For Q4 FY 2018, the net 

privately-held marketable borrowing need is projected to be $273 billion, with an end-of-September cash balance of $350 billion. OFP’s 

FY 2018 projection for net privately-held marketable borrowing is $1,118 billion. 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. 

• OMB ($1,124 billion in FY 2018) and CBO ($1,023 billion in FY 2018) do not use the concept of privately-held marketable borrowing 

when discussing financing requirements. For comparison purposes, OFP’s net marketable borrowing estimate of $962 billion should be 

used. These figures do not take into account the additional privately-held borrowing necessary to finance SOMA redemptions.

Projected Net Marketable Borrowing

• Recent deficit estimates in conjunction with SOMA redemptions suggest that Treasury auction sizes will need to rise over the next few 

years. Updated budget estimates from OMB and CBO provided information on the amount of borrowing needed over the next few 

years. CBO’s budget projections are similar to OMB’s. 

Demand for Treasury Securities

• Bid-to-cover ratios for bills remain above crisis-era levels, at a time when overall bill issuance rose to meet seasonal borrowing needs. 

Demand for nominal coupons, TIPS, and FRNs remains consistent with the recent past. 

• Foreign demand remains strong. 

Highlights of Treasury’s May 2018 Quarterly Refunding Presentation

to the Treasury Borrowing Advisory Committee (TBAC)

4
Section II:

Fiscal

5
(50%)

(40%)

(30%)

(20%)

(10%)

0%

10%

20%

30%

40%

50%

60%

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

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

Year-over-Year % Change

Quarterly Tax Receipts

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

6

Source: United States Department of the Treasury 
7

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 

0

20

40

60

80

100

120

140

160

Mar-08

Jul-08

Nov-08

Mar-09

Jul-09

Nov-09

Mar-10

Jul-10

Nov-10

Mar-11

Jul-11

Nov-11

Mar-12

Jul-12

Nov-12

Mar-13

Jul-13

Nov-13

Mar-14

Jul-14

Nov-14

Mar-15

Jul-15

Nov-15

Mar-16

Jul-16

Nov-16

Mar-17

Jul-17

Nov-17

Mar-18

$ bn

Monthly Receipt Levels

(12-Month Moving Average)

Individual Income Taxes Corporation Income Taxes Social Insurance Taxes Other
Source: United States Department of the Treasury 8

0

100

200

300

400

500

600

HHS

SSA

Treasury

Defense

VA

Agriculture

OPM

Homeland Security

Education

Transportation

Other Defense Civil

Labor

$ bn

Largest Outlays

Oct - Mar FY 2017 Oct - Mar FY 2018
9

Source: United States Department of the Treasury 

(40)

(30)

(20)

(10)

0

10

20

30

Q2-08Q3-08Q4-08Q1-09Q2-09Q3-09Q4-09Q1-10Q2-10Q3-10Q4-10Q1-11Q2-11Q3-11Q4-11Q1-12Q2-12Q3-12Q4-12Q1-13Q2-13Q3-13Q4-13Q1-14Q2-14Q3-14Q4-14Q1-15Q2-15Q3-15Q4-15Q1-16Q2-16Q3-16Q4-16Q1-17Q2-17Q3-17Q4-17Q1-18Q2-18

$ bn

Fiscal Quarter

Treasury Net Nonmarketable Borrowing

Foreign Series State and Local Govt. Series (SLGS) Savings Bonds
Source: United States Department of the Treasury 10

0

100

200

300

400

500

600

700

800

October

November

December

January

February

March

April

May

June

July

August

September

$ bn

Cumulative Budget Deficits by Fiscal Year

FY2016 FY2017 FY2018
11

FY 2018-2020 Deficits and Net Marketable Borrowing Estimates in $ billions

Primary Dealers1 CBO2 OMB3

FY 2018 Deficit Estimate 820 804 832

FY 2019 Deficit Estimate 1,030 981 984

FY 2020 Deficit Estimate 1,110 1,008 987

FY 2018 Deficit Range 740-895

FY 2019 Deficit Range 950-1,180

FY 2020 Deficit Range 1,000-1,250

FY 2018 Privately-Held Net Marketable Borrowing Estimate* 1,060 1,118**

FY 2019 Privately-Held Net Marketable Borrowing Estimate 1,300

FY 2020 Privately-Held Net Marketable Borrowing Estimate 1,270

FY 2018 Privately-Held Net Marketable Borrowing Range 899-1,320

FY 2019 Privately-Held Net Marketable Borrowing Range 868-1,584

FY 2020 Privately-Held Net Marketable Borrowing Range 1,000-1,500

FY 2018 SOMA Redemption Estimate 175 156**

FY 2019 SOMA Redemption Estimate 285

FY 2020 SOMA Redemption Estimate 222

FY 2018 Net Marketable Borrowing Estimate 885 1,023 962**

FY 2019 Net Marketable Borrowing Estimate 1,015 1,074 1,082

FY 2020 Net Marketable Borrowing Estimate 1,048 1,065 1,075

Estimates as of: Apr-18 Apr-18 Feb-18

1Based on primary dealer feedback in April 2018. Estimates above are averages. 

2Table 4-4 of CBO's "The Budget and Economic Outlook: 2018 to 2028," April 2018.

3Table S-10 of OMB's "Budget of the United States Government, Fiscal Year 2019," February 2018.

*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.

**OFP's FY 2018 Estimates.
Projections are from OMB’s Table S-10 of “Budget of The U.S. Government Fiscal Year 2019,” February 2018.

OMB’s Projection

(16%)

(14%)

(12%)

(10%)

(8%)

(6%)

(4%)

(2%)

0%

2%

(1,600)

(1,400)

(1,200)

(1,000)

(800)

(600)

(400)

(200)

0

200

200820092010201120122013201420152016201720182019202020212022202320242025202620272028

% of GDP

$ bn

Fiscal Year

Budget Surplus/Deficit

Surplus/Deficit (LHS) Surplus/Deficit (RHS)

12
Section III:

Financing

13
14

Assumptions for Financing Section (pages 15 to 20)

• Portfolio and SOMA holdings as of 3/31/2018.

• Estimates assume an end date for SOMA capped redemptions at the end of CY2020. The assumption is 

based on the median case from “Statement Regarding the Annual Report on Open Market Operations 

during 2017,” Federal Reserve Bank of New York, April 2018.

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

and FRNs given changes made at February 2018 refunding, while using a total of ~$2.29 trillion of bills 

outstanding. 

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

as of 3/31/2018. 

• No attempt was made to account for future financing needs. 
15

Sources of Privately-Held Financing in Fiscal Year 2018 Q2*

*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.

**An end-of-March 2018 cash balance of $290 billion versus a beginning-of-January 2018 cash balance of $229 billion. By keeping the cash 

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

Net Bill Issuance 333 Security Gross Maturing Net Gross Maturing Net

Net Coupon Issuance 155 4-Week 645 565 80 1,220 1,085 135

Subtotal: Net Marketable Borrowing 488 13-Week 642 555 87 1,197 1,068 129

26-Week 564 435 129 1,041 864 177

Ending Cash Balance 290 52-Week 86 80 6 146 140 6

Beginning Cash Balance 229 CMBs 80 49 31 139 99 40

Subtotal: Change in Cash Balance 61 Bill Subtotal 2,017 1,684 333 3,743 3,256 487

Net Implied Funding for FY18 Q2** 428

Security Gross Maturing Net Gross Maturing Net

2-Year FRN 30 41 (11) 71 82 (11)

2-Year 80 52 28 158 78 80

3-Year 78 72 6 150 150 (0)

5-Year 103 108 (5) 205 255 (50)

7-Year 85 46 39 169 118 51

10-Year 65 23 42 128 39 89

30-Year 41 0 41 80 0 80

5-Year TIPS 0 0 0 14 0 14

10-Year TIPS 24 16 8 35 16 19

30-Year TIPS 7 0 7 12 0 12

Coupon Subtotal 513 358 155 1,022 738 284

Total 2,530 2,041 488 4,765 3,994 771

Coupon Issuance Coupon Issuance

January - March 2018 January - March 2018 Fiscal Year-to-Date

Bill Issuance Bill Issuance

January - March 2018 Fiscal Year-to-Date
16

Sources of Privately-Held Financing in Fiscal Year 2018 Q3*

*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.

**Keeping announced issuance sizes and patterns constant for nominal coupons, TIPS, and FRNs based on changes made at February 2018 

refunding. 

***Assumes an end-of-June 2018 cash balance of $360 billion versus a beginning-of-April 2018 cash balance of $290 billion.

Financing Estimates released by the Treasury can be found here: http://www.treasury.gov/resource-center/data-chart-center/quarterlyrefunding/Pages/Latest.aspx

Assuming Constant Coupon Issuance Sizes**

Treasury Announced Net Marketable Borrowing*** 75

Net Coupon Issuance 192

Implied Change in Bills (117)

Security Gross Maturing Net Gross Maturing Net

2-Year FRN 62 41 21 133 123 10

2-Year 94 78 16 252 156 96

3-Year 90 72 18 240 222 18

5-Year 105 90 15 310 345 (35)

7-Year 87 37 50 256 155 101

10-Year 66 12 54 194 52 142

30-Year 42 3 39 122 3 119

5-Year TIPS 16 53 (37) 30 53 (23)

10-Year TIPS 11 0 11 46 16 30

30-Year TIPS 5 0 5 17 0 17

Coupon Subtotal 578 386 192 1,600 1,125 475

April - June 2018

April - June 2018 Fiscal Year-to-Date

Coupon Issuance Coupon Issuance
17

OMB's projections of the change in debt held by the public are from Table S-10 of “Budget of the U.S. Government Fiscal Year 2019,” February 

2018. “Other” represents borrowing from the public to provide direct and guaranteed loans.

1,124

1,082 1,075

995 996

863

687

641

567

490 490

60%

65%

70%

75%

80%

85%

(500)

(300)

(100)

100

300

500

700

900

1,100

1,300

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

% of GDP

$ bn

OMB's Projection of Borrowing from the Public

Primary Deficit (LHS) Net Interest (LHS)

Other (LHS) Debt Held by Public (RHS)

Debt Held by Public Net of Financial Assets (RHS)

The bubbles represent the total net borrowing from the public for that year

$ bn %

Primary Deficit 1,628 18

Net Interest 6,372 71

Other 1,010 11

Total 9,010 100

FY2018 - FY2027 Cumulative Total
18

OMB's economic assumption of the 10-Year Treasury Note rates are from Table S-9 of OMB’s “Budget of the United States Government Fiscal 

Year 2019,” February 2018. CBO’s economic assumption of the 10-Year Treasury Note rates are from Table D-1 of CBO’s “The Budget and 

Economic Outlook: 2018 to 2028,” April 2018. The forward rates are the implied 10-Year Treasury Note rates on March 31, 2018. 

2.3

2.5

2.7

2.9

3.1

3.3

3.5

3.7

3.9

4.1

4.3

20182019202020212022202320242025202620272028

10-Year Treasury Note Rate, %

Interest Rate Assumptions: 10-Year Treasury Note

CBO Budget Outlook OMB FY 2019 Budget Implied Forward Rates as of 03/31/2018

10-Year Treasury Rate of 2.74% 

as of 03/31/2018
19

Projected Net Borrowing Assuming Future Issuance Remains Constant

Treasury’s April 2018 primary dealer survey estimates can be found on page 11. OMB's projections of the change in debt held by the public are 

from Table S-10 of “Budget of the U.S. Government Fiscal Year 2019,” February 2018. CBO’s baseline budget projections of the change in debt 

held by the public are from Table 4-4 of “The Budget and Economic Outlook: 2018 to 2028,” April 2018. See table at the end of this section for 

details.

*Projections reflect capped SOMA Treasury redemptions up until the end of CY 2020. 

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

20182019202020212022202320242025202620272028

Fiscal Year

Projected Net Borrowing CBO's "The Budget and Economic Outlook: 2018 to 2028," April 2018

OMB's FY 2019 Budget of the U.S. Government, February 2018 PD Survey Marketable Borrowing Estimates

OFPs FY 2018 Net Marketable Borrowing Estimate
20

Historical Net Marketable Borrowing and Projected Net Borrowing 

Assuming Future Issuance Remains Constant, $ billions

Net borrowing capacity reflects capped SOMA redemptions up until the end of CY 2020. 

Treasury’s April 2018 primary dealer survey estimates can be found on page 11. OMB's projections of the change in debt held by the public are 

from Table S-10 of “Budget of the U.S. Government Fiscal Year 2019,” February 2018. CBO’s baseline budget projections of the change in debt 

held by the public are from Table 4-4 of CBO’s “The Budget and Economic Outlook: 2018-2028,” April 2018. 

*OFP's FY 2018 Net Marketable Borrowing Estimate.

Fiscal 

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

Historical/Projected 

Net Borrowing 

Capacity

OMB's FY 2019 

Budget of the U.S. 

Government

CBO's "The Budget and 

Economic Outlook: 

2018 to 2028"

Primary Dealer 

Survey

2013 (86) 86 720 111 0 830 

2014 (119) (92) 669 88 123 669 

2015 (53) (282) 641 88 164 558 

2016 289 (82) 477 64 47 795 

2017 155 9 292 55 9 519 

2018 487 179 296 52 19 1,033 962* 1,023 885 

2019 0 228 133 45 18 425 1,082 1,074 1,015 

2020 0 85 171 15 (1) 270 1,075 1,065 1,048 

2021 0 61 229 (0) (0) 290 995 1,171 

2022 0 53 255 (12) 3 299 996 1,321 

2023 0 106 132 (9) 5 234 863 1,319 

2024 0 (7) 209 (11) 1 191 687 1,294 

2025 0 (31) 196 (53) (2) 109 641 1,406 

2026 0 (29) 209 (45) (2) 133 567 1,377 

2027 0 (5) 185 (34) (3) 142 490 1,372 
Section IV:

Portfolio Metrics

21
22

40

45

50

55

60

65

70

75

80

198019811982198319841985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018

Weighted Average Maturity (Months)

Calendar Year

Historical Weighted Average Maturity of Marketable Debt Outstanding

Historical Historical Average from 1980 to end of FY 2018 Q2

68.5 months on 

03/31/2018

59.6 months (Historical Average 

from 1980 to Present)
23

Recent Maturity Profile, $ billions

Recent Maturity Profile, percent

End of Fiscal Year <= 1yr (1,2] (2,3] (3,5] (5,7] (7,10] > 10 Total (0,5]

2010 2,563 1,141 895 1,273 907 856 853 8,488 5,872

2011 2,620 1,334 980 1,541 1,070 1,053 1,017 9,616 6,476

2012 2,951 1,373 1,104 1,811 1,214 1,108 1,181 10,742 7,239

2013 2,939 1,523 1,242 1,965 1,454 1,136 1,331 11,590 7,669

2014 2,935 1,739 1,319 2,207 1,440 1,113 1,528 12,281 8,199

2015 3,097 1,775 1,335 2,382 1,478 1,121 1,654 12,841 8,589

2016 3,423 1,828 1,538 2,406 1,501 1,151 1,800 13,648 9,195

2017 3,631 2,027 1,504 2,433 1,466 1,180 1,946 14,188 9,596

End of Fiscal Year <= 1yr (1,2] (2,3] (3,5] (5,7] (7,10] > 10 (0,3] (0,5]

2010 30.2 13.4 10.5 15.0 10.7 10.1 10.0 54.2 69.2

2011 27.2 13.9 10.2 16.0 11.1 10.9 10.6 51.3 67.3

2012 27.5 12.8 10.3 16.9 11.3 10.3 11.0 50.5 67.4

2013 25.4 13.1 10.7 17.0 12.5 9.8 11.5 49.2 66.2

2014 23.9 14.2 10.7 18.0 11.7 9.1 12.4 48.8 66.8

2015 24.1 13.8 10.4 18.5 11.5 8.7 12.9 48.3 66.9

2016 25.1 13.4 11.3 17.6 11.0 8.4 13.2 49.7 67.4

2017 25.6 14.3 10.6 17.1 10.3 8.3 13.7 50.5 67.6
Section V:

Demand

24
25

*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 2018 Q2 Auctions

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 1.475 2.9 634.7 59.6 8.2 32.1 10.3 0.0 5.7

Bill 13-Week 1.570 3.0 627.2 49.3 6.5 44.2 14.8 0.0 18.4

Bill 26-Week 1.742 3.1 550.3 49.3 4.0 46.7 13.7 0.0 32.3

Bill 52-Week 1.934 3.1 84.3 61.2 7.1 31.7 1.7 0.0 9.8

Bill CMB 1.515 3.0 80.0 60.6 4.9 34.4 0.0 0.0 1.5

Coupon 2-Year 2.216 2.9 82.8 36.2 14.4 49.4 1.2 15.9 22.5

Coupon 3-Year 2.274 3.0 77.4 38.5 10.1 51.4 0.6 5.7 27.9

Coupon 5-Year 2.569 2.5 103.8 27.8 10.0 62.2 0.2 19.7 66.9

Coupon 7-Year 2.710 2.5 85.9 22.1 12.7 65.3 0.1 16.3 75.3

Coupon 10-Year 2.765 2.5 64.9 25.6 6.1 68.3 0.1 5.2 70.3

Coupon 30-Year 3.043 2.4 41.0 26.9 9.9 63.2 0.0 3.4 101.0

TIPS 10-Year 0.647 2.6 23.9 16.0 13.1 70.9 0.1 1.9 28.8

TIPS 30-Year 1.003 2.3 7.0 22.5 3.8 73.6 0.0 1.7 25.9

FRN 2-Year 0.022 3.0 44.9 57.7 5.1 37.1 0.1 4.8 0.0

Total Bills 1.601 3.0 1,976.5 53.6 6.3 40.1 40.5 0.0 67.7

Total Coupons 2.552 2.7 455.8 29.7 10.8 59.6 2.2 66.3 364.0

Total TIPS 0.727 2.6 30.9 17.5 11.0 71.5 0.1 3.6 54.7

Total FRN 0.022 3.0 44.9 57.7 5.1 37.1 0.1 4.8 0.0
26

1

1.5

2

2.5

3

3.5

4

4.5

5

5.5

6

Sep-08

Mar-09

Sep-09

Mar-10

Sep-10

Mar-11

Sep-11

Mar-12

Sep-12

Mar-13

Sep-13

Mar-14

Sep-14

Mar-15

Sep-15

Mar-16

Sep-16

Mar-17

Sep-17

Mar-18

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)
27

2.5

2.7

2.9

3.1

3.3

3.5

3.7

3.9

Sep-15

Oct-15

Nov-15

Dec-15

Jan-16

Feb-16

Mar-16

Apr-16

May-16

Jun-16

Jul-16

Aug-16

Sep-16

Oct-16

Nov-16

Dec-16

Jan-17

Feb-17

Mar-17

Apr-17

May-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

Dec-17

Jan-18

Feb-18

Mar-18

Bid-to-Cover Ratio

Bid-to-Cover Ratios for FRNs

(6-Month Moving Average)
28

1.5

2

2.5

3

3.5

4

Mar-13

Sep-13

Mar-14

Sep-14

Mar-15

Sep-15

Mar-16

Sep-16

Mar-17

Sep-17

Mar-18

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

1.5

2

2.5

3

3.5

Mar-13

Sep-13

Mar-14

Sep-14

Mar-15

Sep-15

Mar-16

Sep-16

Mar-17

Sep-17

Mar-18

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

Mar-08Mar-09Mar-10Mar-11Mar-12Mar-13Mar-14Mar-15Mar-16Mar-17Mar-18

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 5%, which include Depository Institutions, Individuals, 

Pension and Insurance.

0%

5%

10%

15%

20%

25%

30%

35%

Mar-14

May-14

Jul-14

Sep-14

Nov-14

Jan-15

Mar-15

May-15

Jul-15

Sep-15

Nov-15

Jan-16

Mar-16

May-16

Jul-16

Sep-16

Nov-16

Jan-17

Mar-17

May-17

Jul-17

Sep-17

Nov-17

Jan-18

Mar-18

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
32

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%

Mar-14

May-14

Jul-14

Sep-14

Nov-14

Jan-15

Mar-15

May-15

Jul-15

Sep-15

Nov-15

Jan-16

Mar-16

May-16

Jul-16

Sep-16

Nov-16

Jan-17

Mar-17

May-17

Jul-17

Sep-17

Nov-17

Jan-18

Mar-18

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
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%

10%

20%

30%

40%

50%

60%

70%

Mar-14

May-14

Jul-14

Sep-14

Nov-14

Jan-15

Mar-15

May-15

Jul-15

Sep-15

Nov-15

Jan-16

Mar-16

May-16

Jul-16

Sep-16

Nov-16

Jan-17

Mar-17

May-17

Jul-17

Sep-17

Nov-17

Jan-18

Mar-18

6-month moving average

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 5%, which include Depository Institutions, Individuals, 

Pension and Insurance.

0%

10%

20%

30%

40%

50%

60%

70%

Mar-14

May-14

Jul-14

Sep-14

Nov-14

Jan-15

Mar-15

May-15

Jul-15

Sep-15

Nov-15

Jan-16

Mar-16

May-16

Jul-16

Sep-16

Nov-16

Jan-17

Mar-17

May-17

Jul-17

Sep-17

Nov-17

Jan-18

Mar-18

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
35

Excludes SOMA add-ons. 

10%

20%

30%

40%

50%

60%

70%

80%

Sep-13

Nov-13

Jan-14

Mar-14

May-14

Jul-14

Sep-14

Nov-14

Jan-15

Mar-15

May-15

Jul-15

Sep-15

Nov-15

Jan-16

Mar-16

May-16

Jul-16

Sep-16

Nov-16

Jan-17

Mar-17

May-17

Jul-17

Sep-17

Nov-17

Jan-18

Mar-18

% of Total Competitive Amount Awarded

Primary Dealer Awards at Auction

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

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

TIPS (6-month moving average)
36

Excludes SOMA add-ons. 

0%

5%

10%

15%

20%

25%

Sep-13

Nov-13

Jan-14

Mar-14

May-14

Jul-14

Sep-14

Nov-14

Jan-15

Mar-15

May-15

Jul-15

Sep-15

Nov-15

Jan-16

Mar-16

May-16

Jul-16

Sep-16

Nov-16

Jan-17

Mar-17

May-17

Jul-17

Sep-17

Nov-17

Jan-18

Mar-18

% of Total Competitive Amount Awarded

Direct Bidder Awards at Auction

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

Mar-16

Apr-16

May-16

Jun-16

Jul-16

Aug-16

Sep-16

Oct-16

Nov-16

Dec-16

Jan-17

Feb-17

Mar-17

Apr-17

May-17

Jun-17

Jul-17

Aug-17

Sep-17

Oct-17

Nov-17

Dec-17

Jan-18

Feb-18

Mar-18

$ bn

Total Foreign Awards of Treasuries at Auction, $ billions

Bills 2,3,5 7,10,30 TIPS FRN
Appendix

38
39 *Weighted averages of competitive awards.

**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 1/4/2018 1.270 2.89 49.3 64.0 8.2 27.8 0.7 0.0 0.4

4-Week 1/11/2018 1.280 3.03 49.4 66.4 11.1 22.5 0.6 0.0 0.4

4-Week 1/18/2018 1.295 2.99 44.4 55.3 8.9 35.9 0.6 0.0 0.4

4-Week 1/25/2018 1.230 3.52 34.4 42.5 9.4 48.1 0.6 0.0 0.3

4-Week 2/1/2018 1.440 2.76 24.4 76.3 2.8 20.9 0.6 0.0 0.2

4-Week 2/8/2018 1.480 3.16 13.9 72.4 15.2 12.5 1.1 0.0 0.1

4-Week 2/15/2018 1.360 3.27 49.4 57.2 5.1 37.7 0.6 0.0 0.4

4-Week 2/22/2018 1.380 2.48 54.4 57.8 8.6 33.6 0.6 0.0 0.5

4-Week 3/1/2018 1.495 2.80 59.0 54.4 9.3 36.3 1.0 0.0 0.5

4-Week 3/8/2018 1.550 3.01 63.7 55.0 8.8 36.2 1.3 0.0 0.6

4-Week 3/15/2018 1.650 2.58 64.3 70.4 8.8 20.8 0.7 0.0 0.6

4-Week 3/22/2018 1.720 2.88 64.1 59.9 8.0 32.1 0.9 0.0 0.6

4-Week 3/29/2018 1.705 2.71 63.8 56.0 5.7 38.3 1.2 0.0 0.6

13-Week 1/4/2018 1.435 3.08 46.7 41.9 6.2 51.8 1.3 0.0 1.4

13-Week 1/11/2018 1.430 2.90 47.0 54.9 7.7 37.4 1.0 0.0 1.4

13-Week 1/18/2018 1.430 3.15 47.1 41.1 11.7 47.2 0.9 0.0 1.4

13-Week 1/25/2018 1.430 2.84 46.4 65.9 7.4 26.7 1.6 0.0 1.4

13-Week 2/1/2018 1.425 2.98 47.0 58.4 9.6 32.1 1.0 0.0 1.4

13-Week 2/8/2018 1.500 2.78 47.2 69.4 7.8 22.8 0.8 0.0 1.4

13-Week 2/15/2018 1.570 3.12 46.8 40.2 5.5 54.3 1.2 0.0 1.4

13-Week 2/22/2018 1.630 2.74 49.9 53.5 5.9 40.6 1.1 0.0 1.5

13-Week 3/1/2018 1.645 2.84 50.0 47.0 5.1 47.9 1.0 0.0 1.4

13-Week 3/8/2018 1.660 3.26 50.0 44.4 4.9 50.6 1.0 0.0 1.5

13-Week 3/15/2018 1.670 3.13 50.1 50.0 5.3 44.7 0.9 0.0 1.5

13-Week 3/22/2018 1.780 3.35 49.9 26.2 5.1 68.8 1.1 0.0 1.5

13-Week 3/29/2018 1.760 2.98 49.1 49.6 3.3 47.2 1.9 0.0 1.5

26-Week 1/4/2018 1.575 3.05 41.2 56.7 3.6 39.7 0.8 0.0 2.4

26-Week 1/11/2018 1.575 3.11 41.1 46.5 4.4 49.0 0.9 0.0 2.4

26-Week 1/18/2018 1.600 3.18 40.9 54.4 7.7 37.9 1.1 0.0 2.4

26-Week 1/25/2018 1.615 3.00 40.4 44.7 4.0 51.3 1.6 0.0 2.4

26-Week 2/1/2018 1.625 3.21 41.0 45.1 5.8 49.0 1.0 0.0 2.4

26-Week 2/8/2018 1.650 2.93 41.1 61.1 4.7 34.3 0.9 0.0 2.4

26-Week 2/15/2018 1.785 2.74 41.1 67.7 3.3 29.0 0.9 0.0 2.4

26-Week 2/22/2018 1.820 3.11 44.0 36.8 3.1 60.1 1.0 0.0 2.6

26-Week 3/1/2018 1.830 3.08 44.1 52.6 3.2 44.2 0.9 0.0 2.5

26-Week 3/8/2018 1.830 3.19 44.1 38.5 2.5 59.1 0.9 0.0 2.6

26-Week 3/15/2018 1.850 3.67 44.1 49.3 3.1 47.6 0.9 0.0 2.6

26-Week 3/22/2018 1.950 2.89 44.0 42.7 2.8 54.5 1.0 0.0 2.6

26-Week 3/29/2018 1.895 3.06 43.2 46.8 4.1 49.1 1.8 0.0 2.6

52-Week 1/4/2018 1.780 2.91 19.7 63.8 5.9 30.3 0.3 0.0 2.3

52-Week 2/1/2018 1.830 3.36 19.5 53.9 8.3 37.8 0.5 0.0 2.3

52-Week 3/1/2018 2.020 3.00 21.6 65.9 5.9 28.2 0.4 0.0 2.5

52-Week 3/29/2018 2.070 2.99 23.5 60.9 8.1 30.9 0.5 0.0 2.8

CMB 1/19/2018 1.210 5.62 0.0 100.0 0.0 0.0 0.0 0.0 0.0

CMB 2/8/2018 1.440 3.80 30.0 35.9 4.1 60.0 0.0 0.0 0.7

CMB 2/16/2018 1.560 2.54 50.0 75.4 5.4 19.1 0.0 0.0 0.9

Bills
40

*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-toCover 

Ratio*

Competitive 

Awards ($bn)

% Primary 

Dealer* % Direct* % 

Indirect*

NonCompetitive 

Awards ($bn)

SOMA "Add 

Ons" ($bn)

10-Year 

Equivalent 

($bn)*

2-Year 1/31/2018 2.066 3.22 25.6 25.8 15.9 58.3 0.4 3.8 6.7

2-Year 2/28/2018 2.255 2.72 27.6 40.3 13.4 46.3 0.4 6.8 7.9

2-Year 4/2/2018 2.310 2.91 29.6 41.3 14.1 44.5 0.4 5.3 8.0

3-Year 1/16/2018 2.080 3.13 23.8 33.6 11.5 54.9 0.2 0.8 8.2

3-Year 2/15/2018 2.280 3.00 25.8 40.5 9.7 49.8 0.2 4.9 10.3

3-Year 3/15/2018 2.436 2.94 27.7 40.7 9.3 50.0 0.3 0.0 9.4

5-Year 1/31/2018 2.434 2.48 34.0 26.0 9.1 65.0 0.0 5.0 21.1

5-Year 2/28/2018 2.658 2.44 34.9 29.3 12.7 58.0 0.1 8.5 23.5

5-Year 4/2/2018 2.612 2.50 34.9 28.2 8.3 63.5 0.1 6.2 22.4

7-Year 1/31/2018 2.565 2.73 28.0 11.7 10.2 78.1 0.0 4.1 23.6

7-Year 2/28/2018 2.839 2.49 29.0 22.1 15.6 62.2 0.0 7.1 26.4

7-Year 4/2/2018 2.720 2.34 29.0 32.1 12.1 55.8 0.0 5.1 25.3

10-Year 1/16/2018 2.579 2.69 20.0 22.0 6.5 71.4 0.0 0.7 20.6

10-Year 2/15/2018 2.811 2.34 24.0 27.1 5.4 67.5 0.0 4.5 28.7

10-Year 3/15/2018 2.889 2.50 21.0 27.3 6.5 66.2 0.0 0.0 21.0

30-Year 1/16/2018 2.867 2.74 12.0 21.2 7.3 71.5 0.0 0.4 28.5

30-Year 2/15/2018 3.121 2.26 16.0 30.8 8.1 61.2 0.0 3.0 43.1

30-Year 3/15/2018 3.109 2.38 13.0 27.3 14.8 57.9 0.0 0.0 29.4

2-Year FRN 1/31/2018 0.000 3.38 15.0 62.8 0.0 37.2 0.0 2.2 0.0

2-Year FRN 2/23/2018 0.016 2.75 15.0 58.9 14.0 27.0 0.0 0.0 0.0

2-Year FRN 4/2/2018 0.049 2.78 15.0 51.5 1.3 47.2 0.0 2.6 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)*

10-Year TIPS 1/31/2018 0.548 2.69 12.9 11.0 10.0 78.9 0.1 1.9 16.6

10-Year TIPS 3/29/2018 0.764 2.56 11.0 21.9 16.7 61.4 0.0 0.0 12.2

30-Year TIPS 2/28/2018 1.003 2.31 7.0 22.5 3.8 73.6 0.0 1.7 25.9

TIPS
1

Confidential

Assessment of Potential 2-Month Bill Issuance and 

Possible Alternative Settlement Cycle
2

Treasury would like the Committee to comment on potential demand for a 2-month bill 

tenor, as well as the effect a 2-month bill would have on pricing and liquidity of other T-bill 

tenors. Please also comment on the potential advantages and disadvantages to having 

some Treasury bill tenors settle and mature outside of the typical Thursday-to-Thursday 

cycle. 

In addition, Treasury would like the Committee to comment on the potential advantages 

and disadvantages to having some Treasury bill tenors settle and mature outside of the 

typical Thursday-to-Thursday cycle. 

TBAC Charge
3

• The public debt is expected to rise considerably in the coming decade. This committee has already 

recommended that 1/4th to1/3rd of the financing gap should be met with bill issuance

• Money Market Fund (MMF) regulation has led to a durable reallocation from Prime to Government 

funds. Despite this, total 2a7 fund investment in T-Bills has increased only modestly with more 

asset growth in repo.

• Increased issuance should cheapen T-Bills vs. repo and unlock significant additional demand from 

MMFs.

• Academic research and our updated work shows a persistent T-Bill premium vs. Coupons 

throughout market regimes. This premium is most pronounced in the very front-end of the curve 

(<90 days).

• Issuing a 2m bill tenor would allow Treasury to meet investor demand, further utilize the on-the-run 

premium, and diversify funding sources while controlling the growth of auction sizes.

Summary

Potential 2m Bill Issuance
4

Public Debt Estimated to Rise Considerably* Estimated Future Issuance by Instrument**

* See CBO’s “Budget and Economic Outlook” report (link).

** Issuance estimates from Goldman Sachs GIR (“US Daily: Small Changes to Our Forecast of Big Deficits”, 12Apr18). Estimates rely on bills to meet the majority of the financing gap in FY 2017, scaling 

into approximately 1/3rd of the financing gap being met by bill issuance in FY2019.

Significant Increase in Debt with 1/4th to 1/3rd of Growth Projected in Bills

Projected Debt and Issuance

0

5

10

15

20

25

30

35

Public Debt Oustanding (USD, tr)

CBO Estimates 

-500

0

500

1000

1500

2000

2500

3000

3500

4000

FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021

TIPS 30Y 10Y

7Y 5Y 3Y

2Y 2-Yr FRN Net Bills

Billions of 

dollars
5

Outstanding Fixed Income Debt Securities Relative Fixed Income Supply

Source: Fed Flow of Funds. Retrieved via Haver Analytics as of 24-Oct-17.

Bills have been roughly unchanged, while other asset classes have substantially grown

Bill Supply in Context: Total Fixed Income Supply

0tn

5tn

10tn

15tn

20tn

25tn

30tn

35tn

40tn

0tn

5tn

10tn

15tn

20tn

25tn

30tn

35tn

40tn

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Treasury Bills Treasury Coupons

Agencies Agency MBS

Short-Term Munis Long-Term Munis

Non-Financial Domestic CP Non-Financial Foreign CP

Financial Domestic CP Financial Foreign CP

Non-Financial Corporates Financial Corporates

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
6

Historical Bill Holdings by Investor Type

Treasury Bill Holdings – Q4 2017

*Other holders include all investor types not included in the granular flow of fund breakdown, notably: banks, broker/dealers, hedge funds, clearinghouses, and retail investors.

Source: Fed Flow of Funds (via Haver). As of 18Apr18..

Foreign investors and U.S. Money Market Funds hold the majority of bills

Major Treasury Bill Holders by Investor Type

Total

1,952bn

Money Market 

Reform

0

100

200

300

400

500

600

700

800

900

2000200120022003200420052006200720082009201020112012201320142015201620172018

Foreign Official

Foreign Private

MMFs

Other Mutual Funds

Fed

Other

Foreign 

Official

16%

Foreign 

Private

21%

MMFs

24%

Other Mutual 

Funds

3%

Fed

0%

Other

36%
7

AUM of Money Market Funds: Govt vs. Prime

Libor/OIS and T-Bill/OIS

Source: Bloomberg. As of April 2018.

Durable Asset Reallocation to Govt 2a7 Funds from Prime

Money Market Reform

3m $Libor vs. OIS 3m TBills vs. OIS

-30

-20

-10

0

10

20

30

40

50

60

Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul

25Apr2013 25Jul2018

2013 2014 2015 2016 2017 2018

MMFs - Prime, AUM ($tr) [LHS] Govt

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul

25Apr2013 25Jul2018

2013 2014 2015 2016 2017 2018

• Regulatory changes for MMFs created a 

significant reallocation away from Prime funds to 

Gov’t funds. This has created a significant 

potential source of demand for T-Bills.

• The recent widening of Libor/OIS—driven by 

technical factors—has increased the yield 

differential between Prime and Gov’t MMFs.

• Investor’s allocation to Gov’t MMFs has 

remained steady despite the rising yield 

premium for Prime funds.

• Elsewhere, the market has seen a reallocation 

to front-end spread products. This suggests that 

the new requirements for some Prime MMFs 

(gates, floating NAVs, etc) has created a durable 

reallocation to Govt products.
8

2a7 Money Fund Relative Holdings Change in 2a7 Money Fund Holdings

(July ’14 to September ’17)

* Repo includes Treasury Repo, Agency Repo, RRP and Other Repo

Source: Morgan Stanley Research, Fed Flow of Funds (via Haver), Crane, ICI, Bloomberg, MSPD (via Haver), Morningstar. As of 24-Oct-17.

Recent Allocations to Government Funds have been split across Repo, Coups and Bills

Money Market Fund Demand

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990 1995 2000 2005 2010 2015

Bills USTs Agencies Munis Repo CDs CP Corps/Foreign Other

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

CP/CDs VRDN Other Agency

DN

UST Bills Agency

Coupons

Repo*
9

Source: Bloomberg. As of April 2018.

Bills trade rich to Repo

Treasury Bill Relative Value

Bills

Richer

Bills

Cheaper

3m Bills vs. 3m Repo

3m Bills vs. Rolling O/N Repo (lagged) 

-180

-160

-140

-120

-100

-80

-60

-40

-20

0

20

40

60

80

100

120

1997 2001 2005 2009 2013 2017

16Apr1993 18Apr2019
10

WAM Has Been Shortening Through The Hiking Cycle

Money Market Funds

15

20

25

30

35

40

45

50

55

2013 2014 2015 2016 2017 2018

Average WAM (days)

Govt Prime Tax Exempt
11

Note: The GHS estimate of the T-Bill premium is based on the difference between actual T-bill yields and a curve that is fitted using all outstanding nominal Treasury coupon securities with a maturity 

greater than 3 months.. The curve is fitted using the model developed by Gurkaynak, Sack and Wright (2007). 

Source: Greenwood, Robin, Samuel G. Hansen, and Jeremy C. Stein, 2015, “A Comparative Advantage Approach to Government Debt Maturity,” Journal of Finance.

GHS Estimate of T-Bill Premium (1990-2006)

Academic research previously present to TBAC suggested that Treasury should consider issuing more bills given the 

existence of a T-bill premium. This premium seems to be especially large at the front-end of the bill curve, 

suggesting there may be unmet investor demand at these tenors.

The premium is estimated by comparing actual historical T-Bill yields to a fitted yield curve calculated from off-therun USTs.

Research presented at the Nov’16 TBAC meeting supports the existence of bill premia

Revisiting the T-Bill Premium

Bills

Richer

Bills

Cheaper
12

We have updated the prior Academic models with additional data and analysis. Our work confirms the prior result 

that T-Bills trade at a premium to the Treasury yield curve. Further, this premium is most pronounced in the frontend of the T-Bill curve (<90 days of remaining maturity).

In addition, we split the analysis to study how the premium has evolved over time. This premium has existed 

throughout different marked conditions since at least 1995. While in absolute bps the premium is smaller today 

than in the past, this can largely be explained by low front-end rates. 

<90d Tenors >30d Tenors

Source: The estimate of the Tbill premium is based on the difference between actual T-bill yields and a curve that is fitted using most outstanding off-the-run nominal Treasury coupon securities with a 

maturity greater than 3 months. The curve is fitted using the model developed by Gurkaynak, Sack and Wright (2006). 

Calculations by TBAC committee staff. As of April 2018.

Updating Prior Academic Work

Revisiting The T-Bill Premium

-250bps

-200bps

-150bps

-100bps

-50bps

0bps

0 30 60 90

Average Yield Spread (bps)

Days to Maturity

1995-2000

2000-2006

2007-2009

2010-2015

2016-

-50bps

-40bps

-30bps

-20bps

-10bps

0bps

30 60 90 120 150 180

Days to Maturity

Bills

Richer

Bills

Cheaper
13

0

10

20

30

40

50

60

70

80

90

4w

Bill

8w

Bill

13w

Bill

26w

Bill

52w

Bill

2y

FRN

2y

Note

3y

Note

5y

Note

7y

Note

10y

Note

30y

Bond

TIPS

Average Auction Size (USD, bn)

FY2017 2018E 2019E 2020E 2021E 2019E** 2020E** 2021E**

0

10

20

30

40

50

60

70

80

90

4w

Bill

8w

Bill

13w

Bill

26w

Bill

52w

Bill

2y

FRN

2y

Note

3y

Note

5y

Note

7y

Note

10y

Note

30y

Bond

TIPS

Average Auction Size (USD, bn)

FY2017 2018E 2019E 2020E 2021E 2019E** 2020E** 2021E**

Bill Issuance Increased by 25% of Financing Gap Bill Issuance Increased by 33% of Financing Gap

Average is shown per auction, including re-openings. CMBs excluded. The top of the PD range shows dealer estimated “maximum auction size ... without causing significant yield deviations from fair 

value”. Estimated issuance if adding 2m Bill representing 14% of outstanding Bill debt, with 4w, 13w and 26w bill reduced disproportionally. TIPS collapsed into single issuance bucket for simplicity.

Source: Treasury Direct and Primary Dealer Survey Q4’17. Calculations by TBAC committee staff. As of April 2018.

Auction Sizes With and Without 2 Month Issuance

Impact on Auction Size

PD Range 

Estimated Auction Size 

Adding 2m Bills 
14

A Tuesday settlement of both 1m and 2m bills provides relief to observed challenges

Considering 2m Pairing and Settlement timing

• Bifurcation of settlement days across the week will act to alleviate overnight funding spikes and concentration of 

funding risk.

• Shifting more issuance settlement to another day via pairing the 1m with the 2m will further increase this 

benefit, and importantly allows the 2m to be reopened as 1m. 

• The pairing of 12m, 6m and 3m should remain unchanged to facilitate the growth of liquidity for the 12m as 

it is reopened.

• Given the tendency of very short end investors to stay there, pairing the 1m and 2m can simplify the roll/laddering 

for this segment, and provides investors with an additional cash flow management option.

• Tuesday settlement allows for avoidance of common Monday/Friday market holidays. From a client flow or volume 

perspective we generally do not observe periodicity around days of the week, however we do observe this based 

on the monthly calendar (i.e. Treasury P&I payments, month-end, quarter end).

• While there likely is plenty of liquidity in the market to allow for investors to move between bills of different 

settlement dates in the steady state, the initial 2 month ramp up period could see material swings (up to $80bn) in 

outstanding bills between one Thursday and the next Tuesday.
15

Source: BNYM Tri Party Data: BNYM, ICAP General Collateral Data: Bloomberg, DTCC GCF Repo Index: Bloomberg

Growing Thursday settlement has led to spikes in O/N Funding Rates

Overnight Funding

(0.015)

(0.010)

(0.005)

0.000

0.005

0.010

0.015

0.020

0.025

2 Mon 3 Tue 4 Wed 5 Thu 6 Fri

Avg Delta (bps)

Average of GC chg Average of GCF chg Average of BNY triparty chg

• We observe overnight funding spikes of 

~2bp every Thursday driven by the 

current T-bill settlement cycle.

• With further increase of Thursday bill 

settlements, either through a new bill 

tenor or increasing size on existing 

issues, this impact will increase. 

• While the effect has thus far been 

manageable, there are 2 reasons for 

concern: increased bill issuance driving 

the spike higher, and the use of O/N 

funding rates in the creation of SOFR 

will increase the need for stability.

Avg Repo Rates 

Aug 2015 – Present*

* First and last days of the month, and Fed move days + following days are excluded
16

Sufficient liquidity exists to support reinvestment needs between settlement cycles

5 Day Settlement Mismatch

Short Bill Size Short Bill Activity

$bn Bill Volume $bn

26-Apr Original 15-Apr-17 12m 20 19-Apr-18 12-Apr 1.64/1.56 19-Oct-17 6m 36

Reopen 20-Oct-17 6m 36 13-Apr 1.64/1.57 18-Jan-18 3m 48

Reopen 25-Jan-18 3m 48 16-Apr 1.62/1.45 8-Feb-18 CM 30

Reopen 29-Mar-18 1m 65 17-Apr 1.65/1.48 22-Mar-18 1m 65

169 18-Apr 1.65/1.55

179

$bn

3-May Original 2-Nov-17 6m 36 Bill Volume $bn

Reopen 1-Feb-18 3m 48 12-Apr-18 5-Apr 1.65/1.60 12-Oct-17 6m 36

Reopen 5-Apr-18 1m 55 6-Apr 1.64/1.61 11-Jan-18 3m 48

139 9-Apr 1.64/1.61 6-Feb-18 CM 50

10-Apr 1.65/1.62 15-Mar-18 1m 65

$bn 11-Apr 1.67/1.64

10-May Original 9-Nov-17 6m 36 199

Reopen 8-Feb-18 3m 48

Reopen 12-Apr-18 1m 45

129

Trading Range

Last 5 days 

$3.1bn ICAP

Trading Range

Last 5 days 

$2bn ICAP

Bill Issuance History

Bill Issuance History

With respect to the need to cover the 5 day window between Thursday and Tuesday settlements, there is sufficient liquidity in the 

market, assuming a conservative scenario of 2m bill issuance size of at least $20bn and less than $10bn/week of Thurs to Tues roll 

activity. 
17

 

Settlement and Clearance

Concentrated funding stress and intraday credit extension needs around the single weekly 

settlement would be alleviated through a bifurcated cycle

• The primary US Government Clearing firm has a highly resilient operating infrastructure which has 

been tested for 2x current peak volumes of securities clearance and settlement.

• Increasing issuance and settlement volumes present innate increases in Operational Risk, however 

there are no specific areas of concern.

• The single point of new US Government security issuance at 9:15am EST creates an acute liquidity 

drain for the Clearing firms. 

• The single day of security issuance also concentrates intraday credit extension from Clearing firms 

into one day, as clients work to fund their positions through tri-party or other means.

• The distribution of settlement, staggered within the business day or across multiple days of the 

week, would act to reduce both the financing burden for the clearing system and the intraday credit 

risk profile in the market.
18

Given their relatively small size, foreign markets require single auction and settlement 

cycles to maintain liquidity

Foreign Bill Markets

Germany

 Small market 

- Currently €10bn total outstanding

 Irregular auction schedule

- Announced and auctioned as needed

United Kingdom

 Issuance currently to 9mo

- £60bn total outstanding

- 1 week to 9 month maturities outstanding

• 1 year bills can be issued at times

- Individual issues are very small <£3.5bn

- Illiquid

• Bid/Offer spreads are 10bps wide in ‘active’ bills

 Regular weekly auction schedule

- 1m, 3m, and 6m are auctioned weekly, 9m, and 1y as needed

- Friday auction, and announcement for the following week

- Monday settlement (T+1)

- Outstanding issues are tapped at each point as the roll down 

the curve

- CM bills issued as needed

France

 Full Curve

- €141bn total outstanding

- 1 week to 1 year maturities outstanding

- Individual issues are relatively small <€10bn

• Bid/Offer spreads are 5bps wide in ‘active’ bills

 Regular weekly auction schedule

- 3m and 6m auctioned weekly, 1y auctioned monthly

- Friday announcements

- Monday Auction

- Wednesday settlement (T+2)

- Outstanding issues are tapped at each point as the roll down 

the curve

- CM bills issued as needed
19

• Observed congestion around the current auction cycle creates capacity and potential operational 

risk.

• This committee has previously recommended 25% to 33% of the financing gap to be funded with TBills. This is projected to significantly increase T-Bill auction sizes. 

• Heavy settlement volumes on Thursday has a negative impact on funding markets and increases 

Treasury’s concentration of funding risk.

• Introducing a 2m point at a new settlement date can alleviate both problems – reducing supply per 

issue and per day.

• TBAC recommends introducing an 8 week bill to settle on Tuesdays.

• TBAC further recommends moving the 4 week bill settlement to Tuesdays as well, as a way to 

further reduce settlement concentration and increase liquidity in the 8 week bill. 

• 13-, 26- and 52-week bills should remain on the Thursday cycle. 

• This will increase the bill sector to 52 cusips from the current 44.

• There is sufficient liquidity in extremely short end bills to support the resultant 5 day window 

between Thursday and Tuesday settlements.

Conclusion