Treasury Presentation to TBAC
Office of Debt Management

Fiscal Year 2018 Q1 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. Eleven 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 $770 billion in Q1 FY18, an increase of $29 billion (4%) year-over-year. Withheld income taxes (including FICA) were up 

$45 billion (8%) year-over-year due to economic growth, and increases in employment and wages. Corporate taxes were down $10 

billion (11%), which could be attributed to companies timing payments or shifting expenses in anticipation of tax reform legislation. 

• Outlays totaled $994 billion in Q1 FY18, $44 billion (5%) higher year-over-year. Department of Homeland Security outlays were $10 

billion (78%) higher due to increased payments for disaster relief. Department of Defense outlays, adjusted for calendar effects, were $9 

billion (6%) higher year-over-year due to increases in spending for operations and maintenance, procurement, research and 

development. Treasury outlays were $9 billion (6%) higher due to increased interest on the public debt. Social Security Administration 

outlays, adjusted for calendar effects, were up $8 billion (3%) due to an increase in program enrollment. 

Sources of Financing 

• Based on the Quarterly Borrowing Estimate, Treasury’s Office of Fiscal Projections currently projects a net privately-held marketable 

borrowing need of $441 billion for Q2 FY 2018, with an end-of-March cash balance of $210 billion. For Q3 FY 2018, the net privately-held 

marketable borrowing need is projected to be $176 billion, with an end-of-June cash balance of $360 billion.

Projected Net Marketable Borrowing

• Recent borrowing estimates from primary dealers suggest that Treasury auction sizes will need to rise substantially over the next few 

years, reflecting both the impact of SOMA redemptions and the dealers’ views of the fiscal outlook. Yet-to-be-released updated budget 

estimates by OMB and CBO will provide additional information on the amount of borrowing needed over the next few years. 

Demand for Treasury Securities

• Bid-to-cover ratios for bills remain above crisis-era levels, at a time when overall bill issuance has been rising. Demand for nominal 

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

Highlights of Treasury’s January 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% Dec-07 Mar-08 Jun-08

Sep-08 Dec-08 Mar-09 Jun-09Sep-09 Dec-09 Mar-10 Jun-10Sep-10 Dec-10 Mar-11 Jun-11Sep-11 Dec-11 Mar-12 Jun-12Sep-12 Dec-12 Mar-13 Jun-13Sep-13 Dec-13 Mar-14 Jun-14Sep-14 Dec-14 Mar-15 Jun-15Sep-15 Dec-15 Mar-16 Jun-16Sep-16 Dec-16 Mar-17 Jun-17Sep-17 Dec-17 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

2 0

4 0

6 0

8 0

100

120

140

160 Dec-07 Apr-08

Aug-08 Dec-08 Apr-09Aug-09 Dec-09 Apr-10Aug-10 Dec-10 Apr-11Aug-11 Dec-11 Apr-12Aug-12 Dec-12 Apr-13Aug-13 Dec-13 Apr-14Aug-14 Dec-14 Apr-15Aug-15 Dec-15 Apr-16Aug-16 Dec-16 Apr-17Aug-17 Dec-17 $ 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

5 0

100

150

200

250

300 HHS SSA Defense Treasury

Agriculture Labor V A Transportation OPM Education Other Defense Civil $ bn

Eleven Largest Outlays

Oct - Dec FY 2017 Oct - Dec FY 2018
9 Source: United States Department of the Treasury 

(40)

(30)

(20)

(10)

0

1 0

2 0

3 0 Q1-08 Q2-08 Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 $ bn

Fiscal Quarter

Treasury Net Nonmarketable Borrowing

Foreign Series State and Local Govt. Series (SLGS) Savings Bonds
10

Source: United States Department of the Treasury 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 CBO3 OMB4

FY 2018 Deficit Estimate 750 563 593 440

FY 2019 Deficit Estimate 965 689 689 526

FY 2020 Deficit Estimate 1025 775 664 488

FY 2018 Deficit Range 641-895

FY 2019 Deficit Range 800-1140

FY 2020 Deficit Range 950-1250

FY 2018 Net Marketable Borrowing Estimate 955 881* 912* 529

FY 2019 Net Marketable Borrowing Estimate 1083 745 748 604

FY 2020 Net Marketable Borrowing Estimate 1128 826 719 552

FY 2018 Net Marketable Borrowing Range 800-1160

FY 2019 Net Marketable Borrowing Range 970-1265

FY 2020 Net Marketable Borrowing Range 1000-1300

Estimates as of: Jan-18 Jul-17 Jun-17 Feb-17

1 Based on primary dealer survey, January, 2018. Estimates above are medians. 

2 Summary Table 1 of CBO's "An Update to the Budget and Economic Outlook: 2017 to 2027," July, 2017.

3 Table 1 and 2 of CBO's "An Analysis of the President's 2018 Budget," June, 2017.

4 Table S-10 of OMB's “Budget of the United States Government, Fiscal Year 2018,” February, 2017.

*For FY 2018, the restoration of extraordinary measures used during the 2017 debt limit impasse artificially adds this amount to 

“Other means of financing,” which shows a larger net borrowing assumption.
(12%)

(10%)

(8%)

(6%)

(4%)

(2%)

0 %

2 %

(1,600)

(1,400)

(1,200)

(1,000)

(800)

(600)

(400)

(200)

0

200 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 % of GDP $ bn

Fiscal Year

Budget Surplus/Deficit

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

Projections are from Table S-10 of “Budget of The U.S. Government Fiscal Year 2018,” February, 2017. 12

OMB’s Projection
Section III:

Financing

13
14

Assumptions for Financing Section (pages 15 to 20)

• Portfolio and SOMA holdings as of 12/31/2017.

• Estimates assume an end date for SOMA capped redemptions of Q1 CY 2022. The assumption is based 

on September 2017 FEDS Notes of “Projected Evolution of the SOMA Portfolio and the 10-year Treasury 

Term Premium Effect.” 

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

FRNs as of 12/31/2017, while using an average of ~$1.96 trillion of bills outstanding. 

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

as of 12/31/2017. 

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

Sources of Privately-Held Financing in Fiscal Year 2018 Q1

*An end-of-December 2017 cash balance of $229 billion versus a beginning-of-October 2017 cash balance of $159 billion. By keeping the 

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

Net Bill Issuance 154 Security Gross Maturing Net Gross Maturing Net

Net Coupon Issuance 128 4-Week 575 520 55 575 520 55

Subtotal: Net Marketable Borrowing 282 13-Week 555 513 42 555 513 42

26-Week 477 429 48 477 429 48

Ending Cash Balance 229 52-Week 60 60 (0) 60 60 (0)

Beginning Cash Balance 159 CMBs 59 50 9 59 50 9

Subtotal: Change in Cash Balance 70 Bill Subtotal 1,726 1,572 154 1,726 1,572 154

Net Implied Funding for FY 2018 Q1* 213

Security Gross Maturing Net Gross Maturing Net

2-Year FRN 41 41 (0) 41 41 (0)

2-Year 78 26 52 78 26 52

3-Year 72 78 (6) 72 78 (6)

5-Year 102 147 (45) 102 147 (45)

7-Year 84 72 12 84 72 12

10-Year 63 17 46 63 17 46

30-Year 39 0 39 39 0 39

5-Year TIPS 14 0 14 14 0 14

10-Year TIPS 11 0 11 11 0 11

30-Year TIPS 5 0 5 5 0 5

Coupon Subtotal 509 381 128 509 381 128

Total 2,235 1,953 282 2,235 1,953 282

Coupon Issuance Coupon Issuance

October - December 2017 October - December 2017 Fiscal Year-to-Date

Bill Issuance Bill Issuance

October - December 2017 Fiscal Year-to-Date
16

Sources of Privately-Held Financing in Fiscal Year 2018 Q2

*Keeping announced issuance sizes and patterns constant for nominal coupons, TIPS, and FRNs as of 12/31/2017. 

**Assumes an end-of-March 2018 cash balance of $210 billion versus a beginning-of-January 2018 cash balance of $229 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** 441

Net Coupon Issuance 139

Implied Change in Bills 302

Security Gross Maturing Net Gross Maturing Net

2-Year FRN 28 41 (13) 69 82 (13)

2-Year 78 52 26 156 78 78

3-Year 72 72 (0) 144 150 (6)

5-Year 102 108 (6) 204 255 (51)

7-Year 84 46 38 168 118 50

10-Year 63 23 40 126 39 87

30-Year 39 0 39 78 0 78

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 497 358 139 1,006 738 268

January - March 2018

January - March 2018 Fiscal Year-to-Date

Coupon Issuance Coupon Issuance
17

OMB’s projections of net borrowing from the public are from Table S-10 of “Budget of the U.S. Government Fiscal Year 2018,” February, 2017. 

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

529

604

552 515 493

369

263 229

163 3 5

50%

55%

60%

65%

70%

75%

80%

(700)

(500)

(300)

(100)

100

300

500

700

900 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 $ bn

OMB's Projection of Borrowing from the Public

Primary Deficit Net Interest Other Debt Held by Public

as % of GDP (RHS)

Debt Held by Public Net of

Financial Assets as a % of GDP (RHS)

The bubble represents the total net borrowing from the public for that year

$ bn %

Primary Deficit (2,017) -54

Net Interest 5,166 138

Other 603 16

Total 3,752 100

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 2018,” February, 2017. The forward rates are the implied 10-Year Treasury Note rates on December 31, 2017. 

1

1.5

2

2.5

3

3.5

4 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 1 0-Year Treasury Note Rate, %

Interest Rate Assumptions: 10-Year Treasury Note

OMB FY 2018 Budget Implied Forward Rates as of 12/31/2017

1 0-Year Treasury Rate of 2.406% 

as of 12/31/2017
19

Projected Net Borrowing Assuming Future Issuance Remains Constant

Treasury’s January 2018 primary dealer survey estimates can be found on page 11. OMB's projections of net borrowing from the public are from 

Table S-10 of “Budget of the U.S. Government Fiscal Year 2018,” February, 2017. CBO's estimates of the borrowing from the public are from 

Summary Table 1 of “The Budget and Economic Outlook: 2017 to 2027,” July, 2017. CBO’s analysis of the President’s budget for net public 

borrowing estimates are from Table 2 of CBO’s “An Analysis of the President’s 2018 budget,” June, 2017. See table at the end of this section for 

details.

*Projections reflect capped SOMA Treasury redemptions up until the first quarter of CY 2022. 

**For both of CBO’s FY 2018 projections, the restoration of extraordinary measures used during the 2017 debt limit impasse artificially adds this 

amount to “Other means of financing” which shows a larger net borrowing assumption.

0

200

400

600

800

1,000

1,200

1,400

1,600 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Fiscal Year

With Capped Fed Redemptions ($ bn)*

Projected Net Borrowing CBO's "An Analysis of the President''s 2018 Budget" (Jun-17)**

OMB's FY 2018 Budget of the U.S. Government (Feb-17) PD Survey Marketable Borrowing Estimates (Jan-18)

CBO's "An Update to the Budget and

Economic Outlook: 2017 to 2027" (Jul-17)**
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 first quarter of CY 2022. 

Treasury’s January 2018 primary dealer survey estimates can be found on page 11. OMB's projections of net borrowing from the public are from 

Table S-10 of “Budget of the U.S. Government Fiscal Year 2018,” February, 2017. CBO’s analysis of the President’s budget for net public 

borrowing estimates are from Table 2 of CBO’s “An Analysis of the President’s 2018 budget,” June, 2017.

*For FY 2018, the restoration of extraordinary measures used during the 2017 debt limit impasse artificially adds this amount to “Other means of 

financing” which shows a larger net borrowing assumption.

Fiscal 

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

Historical/Projected 

Net Borrowing 

Capacity

OMB's FY 2018 

Budget of the U.S. 

Government (Feb-17)

CBO's "An Analysis of 

the President''s 2018 

Budget " (Jun-17)

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 160 90 275 55 3 583 529 912* 955 

2019 0 61 101 46 (6) 201 604 748 1,083 

2020 0 (31) 138 16 (9) 114 552 719 1,128 

2021 0 (53) 134 (4) (3) 73 515 747 

2022 0 15 205 (11) 2 211 493 797 

2023 0 63 136 (9) 6 196 369 737 

2024 0 12 152 (10) 2 155 263 694 

2025 0 (21) 158 (53) (1) 83 229 758 

2026 0 (21) 177 (43) (2) 110 163 782 

2027 0 4 151 (33) (3) 119 35 787 
Section IV:

Portfolio Metrics

21
22

4 0

4 5

5 0

5 5

6 0

6 5

7 0

7 5

8 0 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Weighted Average Maturity (Months)

Calendar Year

Historical Weighted Average Maturity of Marketable Debt Outstanding

Historical Historical Average from 1980 to end of FY 2018 Q1

69.6 months on

12/31/2017

59.5 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 (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

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
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 Q1 Auctions

Security 

Type Term Stop Out Rate (%)*

Bid-to-Cover 

Ratio*

Competitive 

Awards 

($bn)

% 

Primary 

Dealer*

% 

Direct*

% 

Indirect*

Non-Competitive 

Awards ($bn)

SOMA 

Add Ons 

($bn)

10-Year 

Equivalent 

($bn)**

Bill 4-Week 1.104 3.1 566.8 56.7 8.6 34.7 7.0 0.0 5.0

Bill 13-Week 1.223 3.0 543.8 59.5 7.7 32.9 7.5 0.0 15.7

Bill 26-Week 1.355 3.3 465.1 43.8 3.5 52.7 6.2 0.0 27.1

Bill 52-Week 1.500 3.3 59.3 48.9 7.0 44.1 0.7 0.0 6.8

Bill CMB 1.051 3.4 59.0 54.3 8.1 37.6 0.0 0.0 0.7

Coupon 2-Year 1.761 2.7 77.2 41.4 15.2 43.3 0.5 5.5 18.6

Coupon 3-Year 1.780 2.9 71.5 36.5 7.8 55.6 0.2 2.9 24.9

Coupon 5-Year 2.123 2.4 101.9 28.0 10.1 61.9 0.1 7.1 58.7

Coupon 7-Year 2.293 2.4 84.0 25.8 13.4 60.8 0.0 5.9 66.0

Coupon 10-Year 2.346 2.5 62.9 27.2 7.9 64.9 0.1 2.8 66.4

Coupon 30-Year 2.823 2.4 39.0 29.3 8.5 62.1 0.0 1.8 94.3

TIPS 5-Year 0.370 2.8 14.0 16.1 12.2 71.7 0.0 0.0 6.8

TIPS 10-Year 0.512 2.4 11.0 26.2 4.8 69.0 0.0 0.6 12.3

TIPS 30-Year 0.908 2.6 5.0 23.1 0.5 76.4 0.0 0.1 15.1

FRN 2-Year 0.040 3.5 41.0 40.1 2.2 57.6 0.0 0.4 0.0

Total Bills 1.223 3.1 1,693.9 53.7 6.8 39.5 21.3 0.0 55.3

Total Coupons 2.130 2.6 436.5 31.3 10.8 57.8 0.9 26.0 328.9

Total TIPS 0.512 2.6 29.9 21.0 7.5 71.5 0.1 0.7 34.2

Total FRN 0.040 3.5 41.0 40.1 2.2 57.6 0.0 0.4 0.0
26

1

1.5

2

2.5

3

3.5

4

4.5

5

5.5

6 Feb-08 Jun-08 Nov-08 Apr-09

Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Aug-12

Jan-13

Jun-13 Nov-13 Mar-14 Aug-14

Jan-15

Jun-15 Nov-15 Apr-16

Sep-16 Feb-17 Jul-17 Dec-17 Bid-to-Cover Ratio

Bid-t o-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

2.5

3

3.5

4

4.5

Jun-15

Jul-15

Aug-15

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 Bid-to-Cover Ratio

Bid-to-Cover Ratios for FRNs

(6-Month Moving Average)
28

1

1.5

2

2.5

3

3.5

4

4.5 Dec-12 Mar-13 Jun-13

Sep-13 Dec-13 Mar-14 Jun-14Sep-14 Dec-14 Mar-15 Jun-15Sep-15 Dec-15 Mar-16 Jun-16Sep-16 Dec-16 Mar-17 Jun-17Sep-17 Dec-17 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 Dec-12 Mar-13 Jun-13

Aug-13 Dec-13 Mar-14 Jun-14

Sep-14 Dec-14 Mar-15 Jun-15Sep-15 Dec-15 Mar-16 Jun-16

Aug-16 Dec-16 Mar-17 Jun-17Aug-17 Dec-17 Bid-to-Cover Ratio

Bid-t o-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-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Bid-to-Cover Ratio

Bid-t o-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% Dec-13 Feb-14 Apr-14

Jun-14

Aug-14 Oct-14 Dec-14 Feb-15 Apr-15

Jun-15

Aug-15 Oct-15 Dec-15 Feb-16 Apr-16

Jun-16

Aug-16 Oct-16 Dec-16 Feb-17 Apr-17

Jun-17

Aug-17 Oct-17 Dec-17 1 3-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% Dec-13 Feb-14 Apr-14

Jun-14

Aug-14 Oct-14 Dec-14 Feb-15 Apr-15

Jun-15

Aug-15 Oct-15 Dec-15 Feb-16 Apr-16

Jun-16

Aug-16 Oct-16 Dec-16 Feb-17 Apr-17

Jun-17

Aug-17 Oct-17 Dec-17

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% Dec-13 Feb-14 Apr-14

Jun-14

Aug-14 Oct-14 Dec-14 Feb-15 Apr-15

Jun-15

Aug-15 Oct-15 Dec-15 Feb-16 Apr-16

Jun-16

Aug-16 Oct-16 Dec-16 Feb-17 Apr-17

Jun-17

Aug-17 Oct-17 Dec-17

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% Dec-13 Feb-14 Apr-14

Jun-14

Aug-14 Oct-14 Dec-14 Feb-15 Apr-15

Jun-15

Aug-15 Oct-15 Dec-15 Feb-16 Apr-16

Jun-16

Aug-16 Oct-16 Dec-16 Feb-17 Apr-17

Jun-17

Aug-17 Oct-17 Dec-17

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%

Jun-13

Aug-13 Oct-13 Dec-13 Feb-14 Apr-14

Jun-14

Aug-14 Oct-14 Dec-14 Feb-15 Apr-15

Jun-15

Aug-15 Oct-15 Dec-15 Feb-16 Apr-16

Jun-16

Aug-16 Oct-16 Dec-16 Feb-17 Apr-17

Jun-17

Aug-17 Oct-17 Dec-17 % 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%

Jun-13

Aug-13 Oct-13 Dec-13 Feb-14 Apr-14

Jun-14

Aug-14 Oct-14 Dec-14 Feb-15 Apr-15

Jun-15

Aug-15 Oct-15 Dec-15 Feb-16 Apr-16

Jun-16

Aug-16 Oct-16 Dec-16 Feb-17 Apr-17

Jun-17

Aug-17 Oct-17 Dec-17 % 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

2 0

4 0

6 0

8 0

100

120 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 $ 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-to-Cover 

Ratio*

Competitive 

Awards ($bn)

% Primary 

Dealer* % Direct* % Indirect*

NonCompetitive 

Awards ($bn)

SOMA 

Add Ons 

($bn)

10-Year 

Equivalent 

($bn)*

4-Week 10/5/2017 0.980 3.23 34.5 66.8 11.9 21.3 0.5 0.0 0.3

4-Week 10/12/2017 1.015 2.90 34.4 76.8 6.1 17.1 0.6 0.0 0.3

4-Week 10/19/2017 0.995 3.24 39.4 65.4 11.9 22.7 0.5 0.0 0.4

4-Week 10/26/2017 1.005 3.30 44.5 54.7 6.9 38.4 0.5 0.0 0.4

4-Week 11/2/2017 1.020 2.99 49.5 61.5 8.7 29.8 0.5 0.0 0.4

4-Week 11/9/2017 1.035 3.01 49.4 63.3 9.9 26.8 0.5 0.0 0.4

4-Week 11/16/2017 1.045 3.13 49.3 45.3 6.5 48.1 0.6 0.0 0.4

4-Week 11/24/2017 1.130 2.99 44.5 53.2 5.5 41.2 0.5 0.0 0.4

4-Week 11/30/2017 1.170 3.12 43.6 43.5 9.8 46.7 0.6 0.0 0.4

4-Week 12/7/2017 1.180 3.10 34.4 73.1 5.2 21.6 0.5 0.0 0.3

4-Week 12/14/2017 1.240 3.09 44.5 58.3 9.4 32.3 0.5 0.0 0.4

4-Week 12/21/2017 1.245 3.29 49.5 38.5 9.7 51.8 0.5 0.0 0.4

4-Week 12/28/2017 1.245 2.96 49.5 50.6 9.8 39.6 0.5 0.0 0.4

13-Week 10/5/2017 1.050 2.89 41.5 70.0 7.1 22.9 0.5 0.0 1.2

13-Week 10/12/2017 1.085 2.90 41.2 58.1 7.7 34.2 0.6 0.0 1.2

13-Week 10/19/2017 1.090 3.19 41.4 45.5 10.9 43.6 0.5 0.0 1.2

13-Week 10/26/2017 1.105 3.20 40.5 42.1 10.2 47.7 0.6 0.0 1.2

13-Week 11/2/2017 1.130 3.02 41.3 57.0 8.1 34.9 0.5 0.0 1.2

13-Week 11/9/2017 1.185 3.17 40.8 52.8 5.9 41.3 0.6 0.0 1.2

13-Week 11/16/2017 1.240 3.11 41.2 46.2 8.7 45.0 0.6 0.0 1.2

13-Week 11/24/2017 1.285 3.18 41.1 62.2 6.1 31.7 0.6 0.0 1.2

13-Week 11/30/2017 1.285 3.07 40.9 61.3 10.3 28.4 0.6 0.0 1.2

13-Week 12/7/2017 1.290 3.09 41.4 59.3 5.4 35.3 0.5 0.0 1.2

13-Week 12/14/2017 1.320 2.99 44.2 67.1 7.3 25.6 0.6 0.0 1.3

13-Week 12/21/2017 1.355 2.79 44.1 74.3 6.1 19.7 0.7 0.0 1.3

13-Week 12/28/2017 1.445 2.71 44.2 74.0 5.9 20.1 0.5 0.0 1.3

26-Week 10/5/2017 1.190 3.03 35.1 48.4 5.9 45.7 0.5 0.0 2.0

26-Week 10/12/2017 1.220 3.01 34.9 51.6 2.0 46.4 0.5 0.0 2.0

26-Week 10/19/2017 1.240 3.35 35.1 40.5 3.4 56.2 0.5 0.0 2.0

26-Week 10/26/2017 1.245 3.21 34.5 54.0 4.5 41.6 0.5 0.0 2.1

26-Week 11/2/2017 1.260 3.47 35.0 38.6 2.6 58.8 0.5 0.0 2.1

26-Week 11/9/2017 1.300 3.23 35.3 45.0 3.2 51.9 0.5 0.0 2.1

26-Week 11/16/2017 1.360 3.30 35.3 37.1 3.0 60.0 0.5 0.0 2.1

26-Week 11/24/2017 1.415 3.33 35.3 45.5 2.0 52.5 0.5 0.0 2.0

26-Week 11/30/2017 1.435 3.34 35.2 35.6 3.9 60.5 0.4 0.0 2.0

26-Week 12/7/2017 1.450 3.30 35.3 43.2 3.1 53.7 0.4 0.0 2.0

26-Week 12/14/2017 1.460 3.26 38.3 46.8 4.2 49.0 0.5 0.0 2.2

26-Week 12/21/2017 1.480 3.09 38.2 50.4 4.0 45.6 0.5 0.0 2.2

26-Week 12/28/2017 1.530 3.61 37.5 32.7 3.7 63.7 0.5 0.0 2.2

52-Week 10/12/2017 1.365 3.27 19.8 58.8 6.2 35.0 0.2 0.0 2.3

52-Week 11/9/2017 1.485 3.34 19.8 49.8 7.9 42.3 0.2 0.0 2.3

52-Week 12/7/2017 1.650 3.44 19.7 38.2 6.9 54.9 0.3 0.0 2.2

CMB 11/1/2017 1.030 3.33 50.0 48.8 9.3 41.9 0.0 0.0 0.6

CMB 12/8/2017 1.170 4.01 9.0 85.1 1.4 13.5 0.0 0.0 0.1

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-to-Cover 

Ratio*

Competitive 

Awards ($bn)

% Primary 

Dealer* % Direct* % Indirect*

NonCompetitive 

Awards ($bn)

SOMA 

Add Ons 

($bn)

10-Year 

Equivalent 

($bn)*

2-Year 10/31/2017 1.596 2.74 25.8 37.7 14.1 48.2 0.1 0.7 6.0

2-Year 11/30/2017 1.765 2.73 25.7 41.2 17.0 41.9 0.2 1.4 6.1

2-Year 1/2/2018 1.922 2.52 25.7 45.5 14.5 40.0 0.2 3.4 6.5

3-Year 10/16/2017 1.657 2.83 23.8 38.6 7.1 54.3 0.1 0.0 8.0

3-Year 11/15/2017 1.750 2.76 23.8 37.5 9.0 53.5 0.1 2.9 9.0

3-Year 12/15/2017 1.932 3.15 23.8 33.6 7.4 59.0 0.1 0.0 7.9

5-Year 10/31/2017 2.058 2.44 33.9 27.4 11.0 61.6 0.1 0.9 19.0

5-Year 11/30/2017 2.066 2.46 34.0 22.8 11.4 65.8 0.0 1.8 19.1

5-Year 1/2/2018 2.245 2.36 34.0 33.7 7.9 58.4 0.0 4.4 20.6

7-Year 10/31/2017 2.280 2.39 28.0 23.2 13.3 63.4 0.0 0.7 21.3

7-Year 11/30/2017 2.230 2.36 28.0 27.7 13.7 58.6 0.0 1.5 21.5

7-Year 1/2/2018 2.370 2.55 28.0 26.4 13.1 60.5 0.0 3.7 23.2

10-Year 10/16/2017 2.346 2.54 20.0 24.9 6.0 69.1 0.0 0.0 20.0

10-Year 11/15/2017 2.314 2.48 23.0 23.0 9.0 68.0 0.0 2.8 26.5

10-Year 12/15/2017 2.384 2.37 20.0 34.4 8.4 57.2 0.0 0.0 20.0

30-Year 10/16/2017 2.870 2.53 12.0 26.6 10.6 62.8 0.0 0.0 27.5

30-Year 11/15/2017 2.801 2.23 15.0 31.8 6.4 61.8 0.0 1.8 39.3

30-Year 12/15/2017 2.804 2.48 12.0 29.1 9.0 61.9 0.0 0.0 27.5

2-Year FRN 10/31/2017 0.048 3.56 15.0 39.2 0.7 60.2 0.0 0.4 0.0

2-Year FRN 11/24/2017 0.035 3.69 13.0 44.1 6.3 49.6 0.0 0.0 0.0

2-Year FRN 12/29/2017 0.035 3.26 13.0 37.3 0.0 62.7 0.0 0.0 0.0

Issue Settle Date Stop Out 

Rate (%)*

Bid-to-Cover 

Ratio*

Competitive 

Awards ($bn)

% Primary 

Dealer* % Direct* % Indirect*

NonCompetitive 

Awards ($bn)

SOMA 

Add Ons 

($bn)

10-Year 

Equivalent 

($bn)*

5-Year TIPS 12/29/2017 0.370 2.78 14.0 16.1 12.2 71.7 0.0 0.0 6.8

10-Year TIPS 11/30/2017 0.512 2.43 11.0 26.2 4.8 69.0 0.0 0.6 12.3

30-Year TIPS 10/31/2017 0.908 2.64 5.0 23.1 0.5 76.4 0.0 0.1 15.1

Nominal Coupons

TIPS
Treasury has issued Treasury Inflation Protected Securities (TIPS) since 19

currently there are $1.3 trillion TIPS outstanding, representing about 9 peTreasury marketable debt outstanding. We would like the Committee to TIPS issuance programs based on Treasury’s regular and predictable issuframework, liquidity, cost, investor-base diversification, borrowing needsPlease provide perspectives on the costs and benefits of any adjustmentprogram in light of these considerations.TIPS Program Assessment, and Recommendations for Future IssuanceJanuary 2018
Recommendations for Future Issuance 

Treasury should maintain the current share of TIPS issuance (~7%) over time within itportfolio.

– Given lower than average estimates for inflation risk premium we recommend the Treasury increase 

by not more than $26 bn. 

– We recommend that gross issuance increases are tilted toward the 5yr tenor, given more robust liqu

negative inflation risk premium in longer-dated breakeven tenors. 

Supply-side considerations

– Ex-post direct cost estimates conclude the TIPS program has benefited Treasury relative to nominal 

ante estimates point to a diminished future benefit of the program if the recent decline in inflation 

– We expect the factors that have recently held down inflation risk premiums to fade overtime. In this 

should be able to maintain the current share of the TIPS issuance in a gradual and predictable fashio

– We find revenues and outlays have similar sensitivities to inflation. Changing the size of the TIPS iss

significant impact on funding volatility in most circumstances.

Demand-side considerations 

– Foreign holdings of TIPS have increased with room to growth further. Domestic demand has also in

growth in target date-funds. 

– Including TIPS in the broader bond indices would be a significant boost to demand. A more robust 

market would also augment demand for the product overtime. 
Supply-Side Considerations: Summary of TIPS PrograPerformance • Ex-post, the TIPS program has benefited Treasury relative to nominal securities. 

– To-date the TIPS program has saved the Treasury an estimated $47bn relative to the alternative no

suggesting that Treasury has captured inflation risk premium over time. 

• However, ex-ante estimates conclude the TIPS program has been more costly.

– Comparing TIPS auction breakevens to survey-based measures of long-term inflation expectations

regularly issues TIPS at breakeven levels that are under professional forecasters’ inflation projection

• Recently, TIPS breakevens have fallen toward the low end of their historical range

diminished future advantage of the TIPS program. This raises several key question

– Has the decline resulted from a change in the TIPS relative liquidity premium, which the Office of D

can influence, or a change in inflation risk premiums, which ODM cannot influence?

– Are the drivers structural or cyclical?– Does the TIPS program benefit (or cost) the government in other ways that are not captured by dir

• Conclusions: The recent decline in TIPS breakevens is likely the result of a decline 

premiums. However, we expect the factors that have held down inflation risk prem

overtime. 

– Historically, inflation risk premiums have followed monetary policy cycles and the recent decline ap

removal of monetary policy accommodation. 

– The recent period of low realized inflation is also likely affecting investors’ willingness to pay for inf

However, we expect the factors that have recently held down inflation to also fade. 
Ex-post, TIPS have benefited Treasury relative to nomin

To-date, the TIPS program has saved the Treasury an estimated $47bn relative to nomindicating that Treasury has captured inflation risk premium over time. 

-10

0

102030

1997

1998

1999

2000

2001

2002

2003

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2014

2015

2016

5yr TIPS: Cumulative Benefit vs. Nominals ($B)

-10

0

102030

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

10yr TIPS: Cumulative Benefit vs. Nominals ($

-10

0

102030

2004 2005 2006 2007 2008 2009

20yr TIPS: Cumulative Benefit vs. Nominals ($B)

-10

0

102030

1998

1999

2000

2001

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

30yr TIPS: Cumulative Benefit vs. Nominals 
Ex-post benefit (cost) of issuing TIPS relative to nominTreasuries(% annualized, per auction)

-2.0-1.5-1.0-0.5

0.00.51.01.5

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

10yr TIPS: Annualized benefit (cost) per 

-2.0-1.5-1.0-0.5

0.00.51.01.5

1997

1998

1999

2000

2001

2002

2003

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2014

2015

2016

5yr TIPS: Annualized benefit (cost) per auction (%)

-2.0-1.5-1.0-0.5

0.00.51.01.5

2004 2005 2006 2007 2008 2009

20yr TIPS: Annualized benefit (cost) per auction (%)

-2.0-1.5-1.0-0.5

0.00.51.01.5

1998

1999

2000

2001

2001

2002

2003

2004

2005

2006

2007

2008

30yr TIPS: Annualized benefit (cost) per 
Implying future CPI in line with 11/30/17 (swap) breakevincrease TIPS savings to $58bn*. Total benefit is highly future inflation

Ex-post benefit of TIPS to-date Ex-post benefit of TIPS imp

inflation in line with ZC BEI 

*TIPS cost estimates based on assumed future inflation projections are similar to Dave Chung Colin Kim, and Allen X. Zhang, “An Ex Post Performance Analysisof the TIPS Program”, 2013Future benefits discounted to 11/30/17

-20

0

20406080

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

All TIPS: Cumulative Benefit vs. Nominals ($B)

-4.0-2.0

0.02.04.06.0

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

All TIPS: Total benefit (cost) per auction ($B)

-20

0

20406080

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

All TIPS: Cumulative Benefit vs. Nominal

-4.0-2.0

0.02.04.06.0

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

All TIPS: Total benefit (cost) per auction ($

Future inflation 

‐0.2% ‐0.1% 0.0% 

Benefit 83 70 58 
Ex-ante estimates conclude the TIPS program has 

costly

Based on various surveys of professional forecasters’ and consumers’ inflation expecthas regularly issued TIPS at a higher ex-ante cost than nominal securities. 

*Source: Philadelphia Federal Reserve Bank, Federal Reserve Bank of New York, University of Michigan, Haver

 (2.5) (2.0) (1.5) (1.0) (0.5)

 -

 0.5 1.0

Jan-97 Jan-01 Jan-05 Jan-09 Jan-13 Jan-17

10yr Breakeven less 

Longer-term Inflation Expectations

SPF 10yr Ahead Median Infl ExpNew York Fed 3yr Ahead Median Infl ExpU of Mich 5y5y Infl Exp

%

>0

→ TIPS benefit Treasury 

<0

→ TIPS cost Treasury 

 (5.0) (4.0) (3.0) (2.0) (1.0)

 -

 1.0

Jan-97 Jan-01 Jan-05 Ja

5yr Breake

SPF and New York Fed I

SPF 5yr Ahead Median InNew York Fed 3yr Ahead U of Mich 5y5y Infl Exp

%

>0

→ TIPS benefit Treasury 

<0

→ TIPS cost Treasury 
TIPS Breakeven decline implies diminished future 

Since 2014, the 5y5y forward TIPS breakeven has declined by roughly 70bps, and is noend of its historical range. This has happened amid largely stable long-term inflation e

*Source: Philadelphia Federal Reserve Bank, Haver. SPF median forecast series is smoothed via a trailing 2q moving average.

Key questions for Treasury: 

1. What’s changed - TIPS relative liquidity premiums, 

which the Treasury can influence, or inflation risk premiums? 

2. Are the drivers structural or cyclical?3. Does the TIPS program benefit or cost the 

government in other ways not captured by direct cost calculations?

 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2

Jan-97 Jan-01 Jan-05 Jan-09 

5y5y Forward TIPS B

5y5y BEI 2575% Pct (5y5y BEI) SP

%
Fall in Breakevens unlikely the result of changing liquipremiums

Inflation “iota” spreads – a market-based measure of TIPS relative liquidity – suggest tliquidity has been stable since the 2008 financial crisis. TIPS transactions have increased nominal transactions. 

*Inflation iota spreads are defined as the spread between zero coupon inflation swaps, and constant maturity TIPS breakeven inflati

par yield curve. Source: Bloomberg, Haver, Federal Reserve Bank of New York 

 -

 1 2 3 4 5 6

Jun-04 Jun-06 Jun-08 Jun-10 Jun-12 

% TIPS as a % of Nominal Transac

 (0.4) (0.2)

 -

 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6

Jun-04 Jun-06 Jun-08 Jun-10 Jun-12 Jun-14 Jun-16

Inflation Market "Iota" Spreads

(Market Measure of TIPS Relative Liquidity)

5yr Iota 10yr Iota 20yr Iota

%
Other measures of market liquidity corroborate this co

Other market-based measures that tend to be correlated with inflation Iota spreads sug

liquidity isn’t a material detriment to Treasury. 

Source: Bloomberg, Federal Reserve Bank of New York, JPMCDS Basis: High Grade All CDS-Bond Basis

-70-60-50-40-30-20-100

 - 10

 0.2 0.4 0.6 0.8 1.0 1.2 1.4

Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17

Inflation Market "Iota" 

vs Treasury on vs off-the-run spread

10yr Iota US Treasury on vs off the run spread (rhs,invt)

% bps

 - 

 0.2 0.4 0.6 0.8 1.0 1.2 1.4

Jan-05 Jan-07 Jan-09 Jan-11 Ja

Inflation Market "Iot

vs CDS Bas

10yr Iota CDS 

% 
Regressions of BEI-Inflation Swap Differentials on ProxLiquidity (Monthly data)

Model 1:

ݐ ,ݕ10 ݁ݐܴܽ	݌ܽݓܵ	݊݋݅ݐ݂݈݊ܽܫ െ ݐ ,ݕ10 ܫܧܤ

ݐ ߝ൅ ݐ 	ݔܸ݅	 1 ߚ൅ߙൌ

Model 2:

ݐ ,ݕ10 ݁ݐܴܽ	݌ܽݓܵ	݊݋݅ݐ݂݈݊ܽܫ െ ݐ ,ݕ10 ܫܧܤ

ݐ 	ݔܸ݅	 1 ߚ൅ߙൌ

ݐ ߝ൅ ݐ 	݁ܽ݀ݎ݌ݏ	ݕ݅݀ݑݍ݈݅	ݕݎݑݏ݁ܽݎݐ	 2 ߚ ൅

where

treasury liquidity spread ݐ

ൌ 	10y benchmark treasury yield

െ 10y 

off

−the

−run fitted treasury par rate

Model 3:

ݐ ,ݕ10 ݁ݐܴܽ	݌ܽݓܵ	݊݋݅ݐ݂݈݊ܽܫ െ ݐ ,ݕ10 ܫܧܤ

ݐ 	ݔܸ݅	 1 ߚ൅ߙൌ

ݐ 	݁ܽ݀ݎ݌ݏ	ݕݐ݅݀݅ݑݍ݈݅	ݕݎݑݏ݁ܽݎݐ	 2 ߚ ൅

ݐ 	ݏ݅ݏܽܤ	݊݀݋ܤ െ ܵܦܥ	݈݈ܣ	ܽ݀݁ݎܩ	݄݅݃ܪ	 3 ߚ ൅

ݐ ߝ ൅

where

	ݏ݅	 ݐ 	ݏ݅ݏܽܤ	݊݀݋ܤ െ ܵܦܥ	݈݈ܣ	ܽ݀݁ݎܩ	݄݅݃ܪ

an estimate for all names by J.P. Morgan using 5y CDS 

spreads

െ 5y Cash Spread

Sample Period Coeff VIX Co

TSY on

the-ru

Mar 2005-Jan2016Model 1 -1.01* Model 2 -0.48* 0Model 3 -0.15 0Jan 2010-Jan 2016Model 1 -0.34* Model 2 -0.46* -0Model 3 -0.47* -0

*statistically significant at 5% confidence in

TIPS market liquidity measures are highly correlated with other market liquidity measunominal treasury on- vs off-the-run spreads, and the CDS basis. 
Fall in Breakevens more likely the result of changing inpremiums

SPF inflation forecast dispersion, a measure of inflation risks, has declined along with T

0.000.100.200.300.400.500.600.700.800.90

 1.0 1.5 2.0 2.5 3.0 3.5

Jan-97 Jan-01 Jan-05 Jan-09 Jan-13 Jan-17

5y5y Forward TIPS Breakeven

vs Forecast Dispersion

5y5y TIPS Breakeven SPF 10yr CPI Forecast Dispersion

%

%

 -

 0.2 0.4 0.6 0.8 1.0 1.2

Jan-97 Jan-01 Jan-05 J

SPF CPI Forecast D

10yr ahead 

%

Source: Philadelphia Federal Reserve Bank, Haver
Flattening Breakeven curve also points to lower inflatiopremium

0.91.41.92.42.9

Jan '10 Jan '11 Jan '12 Jan '13 Jan '14 Jan '15 Jan '16 Jan '17 Jan '18

%

Seasonality adjusted breakevens

5 year BEI10 year BEI30 year BEI

-20

0

20406080

100

Jan '10 Jan '11 Jan '12 Jan '13 Jan '14 

bps

5s30s breakeve

Source: Bloomberg
Is the inflation risk premium decline structural or cyclic

Historical movements in inflation risk premiums appear cyclical, and can be explained cycles. The recent decline in inflation risk premiums is consistent with the experience d2006 Fed rate hiking cycle. 

*The decomposition of TIPS breakevens into inflation expectations and liquidity and risk premiums is based on the affine term structure modeling framework of D’TIPS: the Information Content of Treasury Inflation-Protected Securities Prices,” 2014. **The real federal funds rate = nominal fed funds target – core CPI inflation (y/y)Source: Bloomberg, Haver, Laubach and Williams, “Measuring the Natural Rate of Interest Redux,” 2015

 (4.0) (3.0) (2.0) (1.0) - 1.0

 - 2.0

 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

Mar-04 Mar-06 Mar-08 Mar-10 Mar-12 Mar-14 Mar-16

% Inflation Risk Premium vs 

Monetary Policy Accomodation 

Inflation Risk Premium*Real FFR** - Neutral Rate of Interest (rhs, invt)

%

 - 

 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

Mar-04 Mar-06 Mar-08 Mar-10 Ma

Inflation Risk Pre

Monetary Policy Ac

Inflation Risk Premium*Real FFR** - 10yr Trailing 

%
Other factors arguing for a normalization in inflation ris

• Investors’ willingness to pay for inflation protection is linked to central 

cycles

• Federal Reserve actions to remove policy accommodation despite low realized inflation may have lead marke

to which the 2% PCE inflation target is an average or a ceiling. 

• However, more recent public remarks from various current and former Fed officials indicate that central bank

their inflation targeting framework. 

• The recent period of low realized inflation has likely moderated investor

of inflation risks. However, we expect realized inflation will normalize m

• The energy and dollar shocks of 2014 and 2015, heightened competition in the retail goods sector and other 

adjustments have dampened realized inflation over the last several years. However, we expect these shocks to 

• Fiscal policy expansion late in the business cycle should be more inflationary. • Restrictive trade policies should also raise price levels. 
Based on simulated TIPS breakevens, we estimate TIPS saved $286B had they been used for 10% of debt issuan1980 to 1996. 

Source: Haver, CBO, Groen/Middeldorp (http://libertystreeteconomics.newyorkfed.org/2013/08/creating-a-history-of-us-inflation-e1980 longest available history for gross debt issuance

 -

 2 4 6 8

 10 12 14

1972

1973

1975

1976

1977

1978

1980

1981

1982

1983

1985

1986

1987

Simulated 10yr BEI vs. realized CPI, using G

10-yr fwd CPI10yr BEI Groen/Middeldorp

 -

 2 4 6 8

 10 12 14 16

1972

1973

1975

1976

1977

1978

1980

1981

1982

1983

1985

1986

1987

1988

1990

1991

1992

1993

1995

1996

1997

1998

Simulated 10yr real yields

10-yr nominal rateGroen/Middeldorp backcastPotential GDP - 60bps

 -

 50

 100 150 200 250 300 350

1980

1980

1981

1982

1983

1984

1985

1985

1986

1987

1988

1989

Simulated benefit of issuing 10% TIPS ($B, 

 -

 1.0 2.0 3.0 4.0 5.0 6.0

1980

1980

1981

1982

1983

1984

1985

1985

1986

1987

1988

1989

1990

1990

1991

1992

1993

1994

1995

1995

1996

Simulated benefit (cost) of 10% TIPS issuance ($B/month)
Bigger Picture, From an ALM perspective Treasury has Inflation Risks

• ALM-type arguments for TIPS issuance are not conclusive in light of the fa

government outlays and revenues are both positively correlated with inflat

• However, its important to keep in mind that nominal interest expense vari

empirical beta to realized growth relative to TIPS interest expense. 

Conclusions : In high inflationary scenarios, Treasury funding volatility is redumore nominal bonds, while in high growth scenarios, Treasury benefits by issumore typical scenarios, Treasury should be indifferent to TIPS vs. nominals.• Further study to include these effects in overall funding model presented earlie
Government Funding Simulation Model Summary (detaAppendix)Receipts & Outlays are simulated based on various assumptions for GDP & InflationParameterized to approximately match CBO estimates under CBO base case

CBO Base Case: Real GDP=1.9%, Inflation=2.0%

Receipts & Outlays evolve from the following system of equations				ܺ௜,௧ାଵ	ൌ ܺ௜,௧ ∗ ሺ1 ൅ ߙ ൅ ௜ߣ௜,ீ ∗ ௉஽ܦܩܲ௧ ൅ ߣ௜,ூ௡௙ ∗ ܫ݂݊௧ ൅ ߝ௜,௧ሻ, ݅ ൌ ሼܴ݁ܿ݁݅ݏݐ݌, ܱݐݑ݈ܽݏݕሽ

Debt issuance in each year is equal to the budget deficit, inclusive of interest expense					ܤ௧ାଵൌ ሺ1 ൅ ݎ௧ሻܤ௧൅ܦ௧

Government Receipts Assumptions

GDP lamda = 2.0, Inf lamda = 1.2, Residual Vol = 6.8%, growth rate matched to CBO

Government Outlay Assumptions

GDP lamda = 0.3, Inf lamda = 1.0, Residual Vol = 6.8%, growth rate matched to CBO

Macro Assumptions

GDP Vol = 1.3%, Inf Vol = 1.3% based on past 10-year realized vol

Independence assumed between GDP & inflation; empirically correlation is slightly negativMean levels change for each macro scenario

Interest Cost Assumptions

Starting 10Y Nominal Yield = 2.4% (as of 12/31/17), Starting 10Y Real Yield = 0.43% (as of Yields evolve via CBO Base Case calibrated to CMAs (10Y Nominal=3.2%, 10Y Real=1.1% teStochastic Component - Nominal Betas: GDP=0.2, Inf=0.36, Real Betas: GDP=0.09, Inf=0
Time-Series Surplus VolatilityCompute the time-series volatility of the budget surplus for each macro scenario scenariosWeighted scenarios defined as follows

Equal probability weighted scenarios= [0.25 0.25 0.25 0.25] (Q1,Q2,Q3,Q4)High growth bias = [0.375 0.375 0.125 0.125]High inflation bias = [0.375 0.125 0.125 0.375]

0 10 20 30 40 50 60 70 80 90 100

TIPS Issuance Percentage

650700750800850900950

Time-Series Surplus Volatility - 10Y ($bn/yr)

Surplus Volatility by Scenarios HG/HI

HG/LILG/LILG/HI

0 10 20 30 40 50 60 

TIPS Issuance Percentag

650700750800850900950

Time-Series Surplus Volatility - 10Y ($bn/yr)

Surplus Volatility by Weighted S

EqWProbGrthBiasInflBias

Low growth with high inflation – reduced TIPS are optimal. High growth, high inflation – increased TIPS are optimalBias to higher inflation marginally prefer nominals, bias to higher growth marginally prefer T
Demand Side Considerations: U.S. TIPS issuance relanominals is at the average of international peers

ILB Market ILB market size ($B) Total debt outstanding ($B) % of Total Debt

Australia $30.3 $576.3 5.2%

Canada $54.8 $1,136.3 4.8%

Denmark $6.1 $114.2 5.3%

France $233.5 $1,921.0 12.2%

Germany $84.8 $1,715.1 4.9%

Italy $159.1 $1,974.6 8.1%

Japan $62.9 $9,007.9 0.7%

New Zealand $10.3 $122.5 8.4%

Spain $32.1 $993.4 3.2%

Sweden $25.4 $155.3 16.4%

U.K. $760.6 $2,504.2 30.4%

U.S. $1,210.4 $17,010.8 7.1%

Total $2,670.4 $37,231.4 7.2%

SOURCE: Barclays, Bank of International Settlements; As of 31 December 2016
Foreign TIPS holdings have increased with room to gr

Note: Long term securities defined as securities longer than 1y in maturity

Source: US Treasury, Haver Analytics

Foreign TIPS holdings have increased at a faster rate than nominals

Note: Float calculated as marketable debt outstanding ex SOMA holdingsSource: US Treasury, Haver Analytics

TIPS share of foreign long term Treasury portfolio has doubled, with more room to grow

Foreign TIPS demand vs no• Foreign investors now ow

- Up from 30% in 2011

• This growth is more impre

in foreign nominal holding

• Consequently, TIPS holdin

long term Treasury portfo

Room for foreign demand • Importantly, there is room 

portfolios to grow:

- Foreign allocation to 

% long term Treasurie

- TIPS are now more ac

management tool

• Further allocation to TIPS 

source of significant incre

- 1% increase in foreign 

foreign holdings, tranadditional demand

• Foreign holders are reported 

residence, not the nationality counterparty. 
Within foreign holdings, demand showing signs of sh

toward private investors

Source: US Treasury, Haver Analytics

Foreign official TIPS holdings are now a smaller share...

Note: Financial centers include Cayman Islands, Luxembourg, the UK and the CaribbeanSource: US Treasury, Haver Analytics

Foreign demand landscape may b• Over the past year or so, private 

stepped up

- Official* foreign investor’s sh

• On the other hand, holdings of T

such as Cayman Islands, LuxembCaribbean have increased**

- Growth of risk parity funds h

the shift

- While popularity of these fun

time, the increasing presencinvestors (with potentially twpositive for the TIPS program

• A more diversified TIPS investor 

more price sensitive one, is a pos

...amid signs that private demand is picking up

*Foreign official investors include natioand regional organizations, and soverei**TIC data would include transactions band the Cayman Islands Master Fund o
Domestic demand on more solid footing too

Source: Bloomberg, Nomura

Trajectory of domestic TIPS funds AUM suggests renewed demand

Source: US Treasury, Haver Analytics

Recent pickup in domestic de• Recent funds data show that 

to rise again after falling duri

- Higher appetite for the a

declining inflation premi

• Data also shows larger alloca

funds, likely reflecting:

- Increased popularity of t- Greater preference for sh

a hiking cycle

Secular rise in domestic fund • Investor allotment data for T

rising domestic fund demand

- Domestic fund demand 

pace with that for nominby more than investors sevents

Stronger domestic fund participation in TIPS auctions, in line with nominals
Target Date Funds are growing strongly: additional lon

Source: VanguardHistorical growth of TDF assets TDFs likely to remain significan

• We estimate TDFs to have $1.6

allocation between 1.5-3%

• Top six providers of Target Date 

~25% in 2011-16

- 20% of 401(k) assets and 5

• TDF TIPS demand will likely hav

duration TIPS.

Projections• Current TIPS holdings in TDFs a• Over the next 5 years, estimate

from $50-120bn

• Over the next 10 years, $75-20• Our estimate range depends o

allocation in TDFs (1.5-3%) and 20%)

Estimated growth in TIPS holdings of TDFs
Liquidity has improved at the front end, but less so at the 

longer endLiquidity at the front end of the TIPS curve has improv

TIPS liquidity has improved • One liquidity measure of TI

relative Z-spread ASW. This difference between TIPS annominals

- While imperfect, this is 

liquidity of TIPS vs nom

• Given that TIPS are an “insu

reduces liquidity and off-thand hold quicker than nom

• Models that extract liquidity 

security mispricing is in line adjust for liquidity differenc

Source: Barclays
Source: US Treasury, Haver Analytics

Primary dealer TIPS turnover has increased, even as nominal has stabilized...

Primary dealer turnover of TIPS rising consistently

...but remains below nominals. TIPS more “buy and hold” product than nominals

Primary dealer transactions • With greater demand from 

investors over the last few transactions have increase

- Increased prominence 

are partly responsible primary dealer transac

• This is in contrast to nomin

transaction volumes have (even though amount outsTreasuries has increased) 

- Increased “futurization

market, where a greatfutures (vs cash nomincontributed to the relatransactions 

• Despite the increase in TIP

nominals, when measured 
Traded volume on inflation swaps has increased 5x, but 

remains small

Lack of robust inflation derivative market hampering plinked issuance

TIPS well suited for corporate • TIPS returns have a very stab

corporate returns

- True across several corpo

industrials and utilities

- Suggesting that TIPS wo

corporate linked issuance net corporate ALM volat

Lack of derivative market an i• Lack of sufficiently liquid infla

swapping of linked issuance 

• Pickup in centrally cleared inf

step in this direction

- Allows monetizing of liqu

Source: Bloomberg SDR, Nomura - Active hedging of outsta

$mn
Source: Bloomberg

Adding TIPS to US Agg would provide diversification benefits to end users

Including TIPS in broader index would be a significan

TIPS inclusion in US Agg would be a significant demand boost from a more diversified investor baseSource: Bloomberg, Vanguard

Adding TIPS to US Agg offers • Correlation between US Treas

high (typically more than 90%

- In other words, investors 

served buying Treasury ldiversified US Agg linked 

• Adding TIPS to this index wo

diversification benefits to end correlation with US Agg is low

Index inclusion would be a sig• Bloomberg estimates that $3

family of indices

- TIPS would be ~5.5% of - Assuming 30% cannibaliz

linked products, this tranincremental demand

• Importantly, it will provide a w

to be overweight or underweimproving liquidity
Source: Nomura, Vanguard

TIPS roll-off under current auction sizes is larger than of nominals

Room to increase auction sizes at the front end

Front end TIPS auctions have outperformed longer endSource: US Treasury

Room to increase auction sizes, partic• Stated objective could be to maintain 

issuance within its broader funding pterm

- Given low estimates of inflation r

only a modest increase in TIPS is

- Retain flexibility to adjust auction 

structural pickup in inflation prem

• TIPS roll off at a quicker pace than no

- Therefore, net increase would be 

gross increase.

Tenor recommendation• Given higher liquidity, demand and n

recommend focusing on the shorter e

- We do not recommend reducing 

as to not adversely impact liquid

- We believe this approach to teno

balance between reducing taxpaymaintaining the “regular and pre

- Just like increasing front e

not compromise the “regobjective, postponing the increase would not either

- Similarly, while lowering a

inflation risk premium coreduction in commitment postponing the increase 

• Auction performance over the last 

analysis of added value of front en

• 5y auctions have significantly 

auctions over 1 to 5y lookbac
Suggestions for implementing a 26bn increase in grosissuance

• Add a new October maturity 5 yr TIPS.

• Do not add on to existing 5 yr as this is already the largest issue ~44bn for Apr ’22• Adding one more October maturity 5 yr achieves the right balance of evening out 

and seasonality points as well as avoids fragmenting the market into too many smliquid issues.

• Add a 5 yr TIPS auction to the months with 30 yr TIPS: Oct, Feb, Jun.

• Add the auction in the same ‘TIPS week’ as 30 year TIPS.

Comparison of calenissuance and suggestschedule

Month Maturity 2017 (bn) Proposed (bn)

Jan 10 yr 13 13

Feb 30 yr 7 7

5 yr ‐ 11

Mar 10 yr 11 11

Apr

5 yr 16 13 Apr

5 yr

May 10 yr 11 11 Oct

5 yr

Jun 30 yr 5 5

5 yr ‐ 11

Jul 10 yr 13 13

Aug

5 yr 14 11

Sep 10 yr 11 11

Oct 30 yr 5 5

5 yr ‐ 13

Nov 10 yr 11 11

Dec

5 yr 14 ‐

5 yr ‐ 11

131 157
Potential adjustments to the TIPS program: 

Summary of recommendations

Summary of recommendations

Recommendations

Auction RelatedAuction Sizes

Target current share of TIPS issuance (~7%)

within its broader funding portfolio over the medium

term

Auction tenor management Add an October

5 year issue

Auction Frequency

Maintain current schedule for most issues.Add Oct, Feb and Jun

5 yr auction

Move auction date closer to settlement No significant benefit, WI market functioning well

Alternatives to CPI indexing

Likely to be counterproductive, as it will reduce liquidityfor "legacy" TIPS currently outstandingPCE is closer aligned to Fed policy, but it is subject torevision. And the PCE‐CPI gap is well understood.CPI is likely a better measure of inflation experience forthe end investor

Seek broader bond index inclusion

Inclusion likely to improve diversification within theUS AggCould be a potential source of $120bn ‐ $150bn bn inincremental demand

Buying back short dated/less liquid TIPS TIPS curve on relative ASW basis well behaved

We see no real benefit of such a buy‐back program.
Appendix
Bid-ask spreads for TIPS

TIPS bid ask spread and liquidity model

Regressing averaobservable proxie

Source: San Francisco Federal Reserve

* and ** indicate significHPW metric is based on fitted yield curveGSW TIPS errors are meaet al (2010)Weekly data from Jan19
TIPS gross issuance, as % of total coupon issuance (inc FRN)

Ascertaining the magnitude of issuance increase

Source: US Treasury, Haver Analytics

TIPS are ~7% of gross issuance• Estimated gross coupon issuan• Gross issuance of TIPS: $2200b• Gross issuance under current a• Increase in auction sizes to m

issuance percent = $150-175
Yield curve model used in ALM exercise (pg 18)Yield curve evolves over time as a function of CMAs plus shocks to GDP + InflationNew bond issuance gets assigned a stochastic interest rate based on yield model

Average Yield

Average Yield

Average Yield

Average Yield

Average Yield

10Y Nominal Yield10Y Real Yield
10-Year Simulations, 10% TIPS Issuance (ALM exercise 

High GDP scenarios result in the lowest levels of interest expense and debt outstanding due to high 

Higher inflation is also favorable due to slightly higher assumed inflation passthrough for receipts re

High Growth Low Growth

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 

Receipts 3,315 3,465 3,618 3,781 3,957 4,143 4,322 4,505 4,727 4,950 

Oulays 4,008 4,253 4,448 4,645 4,855 5,086 5,302 5,564 5,834 6,105 

Budget Surplus -693 -789 -829 -864 -898 -943 -980 -1,058 -1,107 -1,155 

Interest Expense 269 352 371 392 415 439 465 492 521 553 

Public Debt 14,656 15,445 16,274 17,138 18,036 18,978 19,959 21,017 22,124 23,279 

Receipts 3,315 3,577 3,858 4,162 4,497 4,862 5,237 5,638 6,107 6,602 

Oulays 4,008 4,319 4,572 4,835 5,116 5,423 5,718 6,062 6,417 6,773 

Budget Surplus -693 -741 -715 -673 -619 -562 -481 -425 -310 -171 

Interest Expense 269 366 389 415 442 468 492 512 529 540 

Public Debt 14,656 15,397 16,112 16,785 17,404 17,965 18,446 18,870 19,180 19,351 

Receipts 3,315 3,498 3,688 3,891 4,110 4,345 4,576 4,816 5,101 5,393 

Oulays 4,008 4,215 4,380 4,543 4,714 4,901 5,069 5,275 5,483 5,685 

Budget Surplus -693 -717 -691 -652 -604 -556 -493 -459 -382 -293 

Interest Expense 269 337 353 369 383 397 409 419 428 436 

Public Debt 14,656 15,373 16,064 16,716 17,320 17,876 18,369 18,828 19,210 19,502 

Receipts 3,315 3,365 3,414 3,465 3,522 3,582 3,629 3,674 3,745 3,809 

Oulays 4,008 4,191 4,329 4,464 4,605 4,760 4,897 5,073 5,252 5,427 

Budget Surplus -693 -825 -916 -999 -1,083 -1,178 -1,268 -1,398 -1,507 -1,619 

Interest Expense 269 337 352 366 380 393 407 422 440 462 

Public Debt 14,656 15,481 16,397 17,396 18,479 19,657 20,925 22,324 23,830 25,449 

Receipts 3,315 3,445 3,577 3,716 3,867 4,025 4,175 4,327 4,515 4,700 

Oulays 4,008 4,295 4,522 4,757 5,011 5,293 5,566 5,894 6,237 6,591 

Budget Surplus -693 -850 -945 -1,041 -1,145 -1,267 -1,391 -1,566 -1,723 -1,891 

Interest Expense 269 366 389 417 449 486 528 574 628 689 

Public Debt 14,656 15,506 16,451 17,492 18,636 19,904 21,295 22,861 24,584 26,475 

Quad 4 

(gdp=1% 

cpi=3%)

Baseline 

CBO Sim 

(gdp=1.9% 

cpi=2%)

Billions Nominal USD

Quad 1 

(gdp=3% 

cpi=3%)

Quad 2 

(gdp=3% 

cpi=1%)

Quad 3 

(gdp=1% 

cpi=1%)
2027 Simulated Metrics vs. Level of TIPS Issuance (ALM pg 18)

Red denotes most favorable outcome, Yellow denotes base case of 10% TIPS issuance

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 

Receipts 5,182 5,182 5,182 5,182 5,182 5,182 5,182 5,182 5,182 5,182 5,182 5,182 5,182 5,182 5,182 5,182 

Oulays 6,383 6,383 6,383 6,384 6,384 6,384 6,384 6,384 6,384 6,384 6,384 6,384 6,383 6,383 6,383 6,383 

Budget Surplus -1,200 -1,201 -1,201 -1,201 -1,201 -1,202 -1,202 -1,202 -1,202 -1,202 -1,201 -1,201 -1,201 -1,201 -1,201 -1,200 

Interest Expense 587 587 587 588 588 588 588 588 588 588 588 588 587 587 587 587 

Public Debt 24,477 24,478 24,480 24,481 24,482 24,483 24,484 24,484 24,484 24,484 24,484 24,483 24,483 24,482 24,480 24,479 

Vol(Budget Surpl) 2,076 2,075 2,074 2,073 2,073 2,072 2,071 2,071 2,070 2,070 2,070 2,070 2,069 2,069 2,069 2,070 

Receipts 7,137 7,137 7,137 7,137 7,137 7,137 7,137 7,137 7,137 7,137 7,137 7,137 7,137 7,137 7,137 7,137 

Oulays 7,112 7,123 7,134 7,145 7,156 7,167 7,178 7,189 7,200 7,211 7,221 7,232 7,242 7,252 7,262 7,273 

Budget Surplus 25 14 3 -9 -20 -31 -42 -53 -63 -74 -84 -95 -105 -116 -126 -136 

Interest Expense 521 532 543 554 566 577 587 598 609 620 630 641 651 661 672 682 

Public Debt 19,166 19,258 19,349 19,439 19,529 19,619 19,709 19,798 19,887 19,975 20,063 20,151 20,239 20,326 20,413 20,499 

Vol(Budget Surpl) 2,665 2,661 2,657 2,654 2,650 2,647 2,644 2,641 2,637 2,635 2,632 2,629 2,626 2,624 2,621 2,619 

Receipts 5,700 5,700 5,700 5,700 5,700 5,700 5,700 5,700 5,700 5,700 5,700 5,700 5,700 5,700 5,700 5,700 

Oulays 5,906 5,896 5,886 5,877 5,867 5,857 5,847 5,838 5,828 5,818 5,808 5,799 5,789 5,779 5,769 5,760 

Budget Surplus -206 -196 -186 -177 -167 -157 -148 -138 -128 -118 -108 -99 -89 -79 -69 -60 

Interest Expense 459 450 440 430 420 411 401 391 381 372 362 352 342 333 323 313 

Public Debt 19,863 19,776 19,689 19,602 19,515 19,428 19,341 19,254 19,167 19,080 18,993 18,906 18,819 18,732 18,645 18,558 

Vol(Budget Surpl) 2,056 2,054 2,051 2,049 2,047 2,045 2,042 2,040 2,038 2,036 2,035 2,033 2,031 2,029 2,028 2,026 

Receipts 3,874 3,874 3,874 3,874 3,874 3,874 3,874 3,874 3,874 3,874 3,874 3,874 3,874 3,874 3,874 3,874 

Oulays 5,620 5,613 5,606 5,599 5,592 5,585 5,577 5,570 5,563 5,555 5,548 5,540 5,533 5,525 5,517 5,510 

Budget Surplus -1,747 -1,740 -1,733 -1,726 -1,718 -1,711 -1,704 -1,696 -1,689 -1,682 -1,674 -1,667 -1,659 -1,651 -1,644 -1,636 

Interest Expense 500 493 486 479 472 465 457 450 443 435 428 420 412 405 397 389 

Public Debt 27,331 27,256 27,181 27,106 27,031 26,955 26,879 26,803 26,727 26,651 26,574 26,497 26,420 26,342 26,265 26,187 

Vol(Budget Surpl) 1,658 1,659 1,659 1,660 1,660 1,661 1,662 1,663 1,664 1,665 1,666 1,667 1,668 1,670 1,671 1,672 

Receipts 4,893 4,893 4,893 4,893 4,893 4,893 4,893 4,893 4,893 4,893 4,893 4,893 4,893 4,893 4,893 4,893 

Oulays 6,937 6,949 6,961 6,973 6,985 6,997 7,009 7,020 7,032 7,044 7,056 7,068 7,079 7,091 7,103 7,114 

Budget Surplus -2,044 -2,056 -2,068 -2,080 -2,092 -2,104 -2,116 -2,128 -2,140 -2,151 -2,163 -2,175 -2,187 -2,198 -2,210 -2,222 

Interest Expense 734 746 758 770 782 794 805 817 829 841 853 864 876 888 900 911 

Public Debt 28,350 28,446 28,543 28,639 28,736 28,832 28,928 29,024 29,120 29,216 29,312 29,408 29,503 29,599 29,695 29,790 

Vol(Budget Surpl) 2,158 2,159 2,159 2,159 2,160 2,161 2,161 2,162 2,163 2,164 2,165 2,166 2,167 2,169 2,170 2,171 

2027 Billions Nominal USD

Baseline Sim 

(gdp=1.9% 

cpi=2%)

Quad 1 

(gdp=3.0% 

cpi=3.0%)

Quad 2 

(gdp=3.0% 

cpi=1.0%)

Quad 3 

(gdp=1.0% 

cpi=1.0%)

Quad 4 

(gdp=1.0% 

cpi=3.0%)

TIPS Issuance

Vol(Budget Surplus) is the standard deviation of the budget surplus across simulations in 2027. It is not the time-series volatility of the budget surplus.