Treasury Borrowing Advisory Committee

Quarterly Refunding 

November 2, 2004
Committee Charge Question 1

Quarterly Refunding Chart Package

We will show you a revised version of the chart package we 

released on Monday of the week of the refunding. We would 

like the Committee’s view on the proposed changes and 

suggestions for further improvements.
Current Financing

Short-term and medium-term borrowing requirements, cash 

balance estimates, and issuance schedule

• FY 2005 Q1 and FY 2005 Q2 Outlook

– We expect net marketable borrowing of $100B this quarter 

and $147B next quarter

• FY 2005 to FY 2009 OMB Outlook

– Current coupons meet expected borrowing assuming:

• 5% projected GDP growth rate

• Revenues rise to historical average

• Expenditures fall below historical average

– Net interest is below 2.5% of GDP




Drivers of Financing Needs 

-5

0

5

10

15

20

25

30

1960 1965 1970 1975 1979 1984 1989 1994 1999 2004 2009

Percentage of GDP

-

0

5

2

2

Percentage of GD

3

Outlays

Revenue

GDP Growth

Net Interest

SOURCE: OMB

Estimated

Average Historical 

Difference: 2%
Projected Net Marketable Borrowing and Hypothetical Bill Auction Sizes

If Coupon Auction Sizes Held Constant

0

5

10

15

20

25

30

35

40

2005 2006 2007 2008 2009

Average Announced 

Auction Size 

$ Billions

0

50

10

15

20

25

30

35

40

Net Borrowin

$ Billions

4-week

13-week

26-week

Assumes OMB's FY 2005 MSR deficit projections and coupon auction sizes remain at most recently announced amounts. Bill issuance 

sizes are shown in fixed shares to meet residual financing needs.

Net Marketable Borrowing (RHS)
If Bill Issuance held Constant as a percent of Portfolio

0

5

10

15

20

25

30

35

40

45

2005 2006 2007 2008 2009

Announced 

auction sizes 

$ billions

0

50

100

150

200

250

300

350

400

450 net borrowin

 $ billions

BILLS 2-YEAR 3-YEAR 5-YEAR 10-YEAR 5-YEAR TIPS 10-YEAR TIPS 20-YEAR TIPS

Net Marketable 

Borrowing (RHS)

* *For bills, the average auction size equals the amount outstanding at the end of the fiscal year divided by 43 

 (i.e., 4 1-month auctions, 13 3-month auctions, plus 26 6-month auctions).
Debt Portfolio

Maturity, issuance and outstanding profile

• Average maturity of issuance stabilizes, averaging 2.8 years

• Maturity of outstanding drops from 4.6 years to 4 years over the

next 5 years

• Composition of nominal issuance is within historical ranges

• Current issuance patterns would lead to a growing proportion of 

5-year notes and TIPS in the portfolio

• The percent of debt maturing over the next 3 years is projected 

to remain stable over the next 4 years, at roughly 60%

Percentage Breakdown of Annual Issuance

0%

10%

20%

30%

40%

50%

60%

70%

80%

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

0%

10

20

30

40

50

60

70

80

Bills 2-3 yrs 4-7 yrs 10-yrs Bonds TIPS

Projected

Projections based on OMB's FY 2005 MSR and assume coupon auction sizes remain at most recently announced amounts. Residual 

amounts financed with bills.

Source: Treasury
Distribution of Marketable Debt Outstanding by Security

0%

5%

10%

15%

20%

25%

30%

35%

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

0%

5%

10

15

20

25

30

35

BILLS 2-3 YR NOTES 4-7 YR NOTES 8-10 YR NOTES BONDS TIPS

Projected

Projections based on OMB's FY 2005 MSR and assume coupon auction sizes remain at most recently announced amounts. Residual 

amounts financed with bills.

Source: Treasury
Percentage of Debt Maturing in Next 12 to 36 Months

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%

75%

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%

75%

Maturing in 12 Months

Maturing in 24 Months

Maturing in 36 Months

Projected

Projections based on OMB's FY 2005 MSR and assume coupon auction sizes remain at most recently announced amounts. Residual 

amounts financed with bills.
Treasury Annual Net Market Borrowing

-300

-200

-100

0

100

200

300

400

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

$ Billions

-30

-20

-10

0

100

200

300

400

Buybacks

over 10 years

5-10 years

2-under 5 years

Bills

 

Projections are based on FY 2005 OMB's MSR and assume coupon auction sizes remain at most recently announced amounts. 

Residual amounts amounts financed with bills.

Projected
Distribution of Marketable Debt Outstanding by Maturity

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2006 2007 2008 2009

Percentage of 

Portfolio

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100

Percentage 

Portfolio

Bills 1 year & under 1-2 years 2-10 years over 10 years

Projections based on OMB's FY 2005 MSR and assume coupon auction sizes remain at most recently announced amounts. Residual 

amounts financed with bills.

Source: Treasury
Uncertainty

Stress to issuance and borrowing costs

• Deficit forecast errors for FY 2004 were comparable to 

previous forecast errors

• Current issuance pattern equally well positioned for higher or 

lower deficits
Average Absolute Federal Budget Forecast Errors 

1997 - 2004

0

50

100

150

200

250

14 months 11 months 8 months 5 months 2 months

months until end of fiscal year

$ billions

0

50

100

150

200

$ billions 250

CBO

OMB

Primary Dealers

Average Error

 for FY 2004

Capital Markets

Treasury’s share of global and domestic markets and Treasury’s liquidity

• Foreign holdings of Treasury debt are at historical highs

• Treasuries represent a small proportion of the domestic debt 

stock

• Debt outstanding as a percent of GDP compares favorably to 

that of many other large economies

U.S. Debt Compared to the G7 

30

35

40

45

50

55

60

65

70

75

80

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Percentage of GDP

3

3

4

4

5

5

6

6

7

7

Percentage of GD8

U.S. Net General Government Debt

G7 less US Median Net General

Government Debt

G7 less US Average Net General

Government Debt

SOURCE: IMF, WEO September 2004

Net debt is federal, state and municipal government 

debt held by the public. (That is, it is net of claims of 

government entities on each other).

Debt data are not always comparable across countries.

Estimated


Net Dealer Positions in Treasuries

-3

-2

-1

0

1

2

3

4

5

6

Feb-01 Jun-01 Oct-01 Feb-02 Jun-02 Oct-02 Feb-03 Jun-03 Oct-03 Feb-04 Jun-04 Oct-04

TIPS 

($ billions)

-160

-140

-120

-100

-80

-60

-40

-20

0

20

Nominal Treasurie

40

($ billions)

TIPS (LHS)

Nominal Treasuries (RHS)

Dealers net 

short TIPS for 

the first time 

(5/14/03)

nominal zero line

TIPS zero line

Source: NY Fed
Committee Charge Question 2

Financing this Quarter

We would like the Committee’s advice on the following:

• The composition of Treasury notes to refund approximately $48 

billion of privately held notes and bonds maturing on November 

15 (this includes $3.1 billion of the 10 3/8% 11/15/04-09 that was 

called on 7/15/04).

• The composition of Treasury marketable financing for the 

remainder of the October-December quarter, including cash 

management bills if necessary.

• The composition of Treasury marketable financing for the 

January-March quarter.