Treasury Presentation to TB
Office of Debt Manageme

Fiscal Year 2016 Q4 Report
Table of Contents

I. Executive Summary p. II. Fiscal

A. Quarterly Tax Receipts p. B. Monthly Receipt Levels p. C. Eleven Largest Outlays p. D. Treasury Net Nonmarketable Borrowing p. E. Cumulative Budget Deficits p. F. Deficit and Borrowing Estimates p. G. Budget Surplus/Deficit p. 

III. Financing

A. Sources of Financing p. B. OMB’s Projections of Net Borrowing from the Public p. C. Interest Rate Assumptions p. D. Net Marketable Borrowing on “Auto Pilot” Versus Deficit Forecasts p. 

IV. Portfolio Metrics

A. Weighted Average Maturity of Marketable Debt Outstanding with Projections p. B. Projected Gross Borrowing p. C. Maturity Profile p. 

V. Demand

A. Summary Statistics p. B. Bid-to-Cover Ratios p. C. Investor Class Awards at Auction p. D. Primary Dealer Awards at Auction p. E. Direct Bidder Awards at Auction p. F. Foreign Awards at Auction p. 
Section I:

Executive Summary
Receipts and Outlays

• Corporate taxes have been weaker than during the equivalent period last year, potentially attributable to the exten

depreciation and smaller corporate profits.

• In FY 2016, net outlays were $166 billion higher than FY 2015, primarily attributable to increased HHS payments, 

calendar effect that shifted payments from October into September. Interest expenses rose due to higher inflation 

and higher interest expense on Government Account Series (GAS) debt.

• The budget deficit for FY 2016 was $148 billion higher than the FY 2015 deficit. 

Sources of Financing in Fiscal Year 2017 

• Based on the Quarterly Borrowing Estimate, Treasury’s Office of Fiscal Projections currently projects a net market

of $188 billion for Q1 FY 2017, with an end of December cash balance of $390 billion. For the Q2 FY 2017, net marneed is projected to be $56 billion, with an end of March cash balance of $100 billion.

• In FY 2017, OMB projects that borrowing from the public will decline to $573 billion. In FY 2016, net marketable b

billion, in part reflecting a $155 billion increase in cash balance.

Projected Net Marketable Borrowing

• Between FY 2017 and 2019 Treasury’s net marketable borrowing could rise notably if the Federal Reserve allows t

held in the SOMA portfolio to mature.

• As of the September 2016 survey of primary dealers, the median expectation was for SOMA reinvestments to cont

Bid-to-Cover Ratios (BTC)

• BTC ratios for TIPS have increased slightly in recent months, and most other coupon tenors are little changed. 

• Since June, 4- and 13-Week bill BTC ratios increased, while 26- and 52-Week bill BTC ratios decreased. 

Investor Class Allotments

• Since the beginning of July, bill auction awards are higher for other dealers and brokers, investment funds, and fo

international institutions. Accordingly, bill auction awards fell for primary dealers. 

• Direct bidder awards were modestly lower across most tenors.

Highlights of Treasury’s November 2016 Quarterly Refunding 

to the Treasury Borrowing Advisory Committee (TBA
Section II:

Fiscal
Source: United States Department of the Treasury 

(50%)(40%)(30%)(20%)(10%)

0%

10%20%30%40%50%60%

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

Jan-12

May-12

Sep-12

Jan-13

May-13

Sep-13

Jan-14

May-14

Sep-14

Jan-15

May-15

Year-over-Year % Change

Quarterly Tax Receipts

Corporate Taxes Non-Withheld Taxes (incl SECA) Withheld Taxes (incl FIC
Individual Income Taxes include withheld and non-withheld. Social Insurance Taxes include FICA, SECA, RRTA, UTF deposits, RUIA. Other includes excise taxes, estate and gift taxes, customs duties and miscellaneous receipts. Source: United States Department of the Treasury 

0

20406080

100120140

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

Jan-12

May-12

Sep-12

Jan-13

May-13

Sep-13

Jan-14

May-14

Sep-14

Jan-15

May-15

$ bn

Monthly Receipt Levels

(12-Month Moving Average)

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

0

200400600800

1,0001,200

HHS

SSA

Defense

Treasury

Agriculture

Labor

VA

Transportation

OPM

Education

$ bn

Eleven Largest Outlays

Oct - Sep FY 2015 Oct - Sep FY 2016
Source: United States Department of the Treasury 

(40)(30)(20)(10)

0

102030

Q4-06

Q1-07

Q2-07

Q3-07

Q4-07

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

$ bn

Fiscal Quarter

Treasury Net Nonmarketable Borrowing

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

0

100200300400500600700

October

November

December

January

February

March

April

May

June

July

August

$ bn

Cumulative Budget Deficits by Fiscal Year

FY2014 FY2015 FY2016
FY 2017-2019 Deficits and Net Marketable Borrowing Estimates 

Primary 

Dealers1 CBO2 CBO3 OMB 

FY 2017 Deficit Estimate 600 594 433 44FY 2018 Deficit Estimate 606 520 383 33FY 2019 Deficit Estimate 685 625 518 42FY 2017 Deficit Ran

ge 525-656

FY 2018 Deficit Ran

ge 525-700

FY 2019 Deficit Range 550-775FY 2017 Net Marketable Borrowing Estimate 628 670 508 57FY 2018 Net Marketable Borrowin

g Estimate 665 582 452 43

FY 2019 Net Marketable Borrowing Estimate 750 676 578 53FY 2017 Net Marketable Borrowin

g Ran

ge 390-762

FY 2018 Net Marketable Borrowin

g Ran

ge 550-740

FY 2019 Net Marketable Borrowing Range 650-900Estimates as of: Oct-16 Aug-16 Mar-16 Jul-

1Based on primary dealer feedback on October 24, 2016. Estimates above are averages. 2Table 1 and 2 of CBO's "An Update to the Budget and Economic Outlook: 2016 to 2026"3Table 1 and 2 of CBO's "An Analysis of the President's 2017 Budget"4Table S-11 of OMB's “The FY2017 Mid-Session Review” 5Table S-13 of OMB's “Budget of the United States Government, Fiscal Year 2017” 
(1,600)(1,400)(1,200)(1,000)

(800)(600)(400)(200)

0

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

$ bn

Fiscal Year

Budget Surplus/Deficit

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

Projections are from Table S-11 of “The FY2017 Mid-Session Review.” 

OMB’s Projection
Section III:

Financing
Assumptions for Financing Section (pages 15 to 22)

• Portfolio and SOMA holdings as of 9/30/2016.• SOMA reinvestments until June 2018, followed by SOMA redemptions until and including 

2022. These assumptions are based on Chair Yellen’s December 2015 press conference and texpectations from the September FRB-NY survey of primary dealers. 

• Assumes announced issuance sizes and patterns constant for Nominal Coupons, TIPS, and 

9/30/2016, while using an average of ~$1.6 trillion of Bills outstanding. 

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

as of 9/30/2016. 

• No attempt was made to match future financing needs. 
Sources of Financing in Fiscal Year 2016 Q4

*An end-of-September 2016 cash balance of $353 billion versus a beginning-of-July 2016 cash balance of $364 billion. By keeping t

constant, Treasury arrives at the net implied funding number. Gross issuance values include SOMA add-ons

Net Bill Issuance 139 Security Gross Maturing Net Gro

Net Coupon Issuance 83 4-Week 590 625 (35) 2,28

Subtotal: Net Marketable Borrowing 222 13-Week 502 388 114 1,70

26-Week 437 370 67 1,48

Ending Cash Balance 353 52-Week 60 67 (7) 230 

Beginning Cash Balance 364 CMBs 0 0 0 95 

Subtotal: Change in Cash Balance (10) Bill Subtotal 1,589 1,450 139 5,79

Net Implied Funding for FY 2016 Q4* 233

Security Gross Maturing Net Gro

2-Year FRN 43 41 2 170 

2-Year 83 87 (4) 350 

3-Year 76 95 (19) 300 5-Year 109 108 1 462 7-Year 90 87 3 381 

10-Year 67 23 44 267 30-Year 41 0 41 167 

5-Year TIPS 15 0 15 47 

10-Year TIPS 25 24 1 80 30-Year TIPS 0 0 0 22 

Coupon Subtotal 548 465 83 2,24

Total 2,137 1,915 222 8,04

Coupon Issuance 

July - September 2016 July - September 2016 

Bill Issuance 

July - September 2016 
Sources of Financing in Fiscal Year 2017 Q1

*Keeping announced issuance sizes and patterns constant for Nominal Coupons, TIPS, and FRNs as of 9/30/2016. Gross issuance reflect SOMA reinvestments. **Assumes an end-of-December 2016 cash balance of $390 billion versus a beginning-of-October 2016 cash balance of $353 billionFinancing Estimates released by the Treasury can be found here: http://www.treasury.gov/resource-center/data-chart-center/qrefunding/Pages/Latest.aspx

Assuming Constant Coupon Issuance Sizes*

Treasury Announced Net Marketable Borrowing** 188

Net Coupon Issuance 47

Implied Change in Bills 141

Security Gross Maturing Net Gross M

2-Year FRN 41 41 (0) 41 

2-Year 52 57 (5) 52 3-Year 72 90 (18) 72 

5-Year 68 73 (5) 68 7-Year 56 65 (9) 56 

10-Year 63 23 40 63 30-Year 39 19 20 39 

5-Year TIPS 12 0 12 12 

10-Year TIPS 9 0 9 9 30-Year TIPS 3 0 3 3 

Coupon Subtotal 415 368 47 415 

October - December 2016

October - December 2016 Fiscal Y

Coupon Issuance Coupo
573

436

534 530

550

652 667 650

739

(400)(200)

0

200400600800

1,000

2017

2018

2019

2020

2021

2022

2023

2024

2025

$ 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 NeFinancial Assets as a % o

OMB’s projections of net borrowing from the public are from Table S-11 of “The FY2017 Mid-Session Review.” Data labels at the the change in debt held by the public in $ billions. “Other” represents borrowing from the public to provide direct and guarantee

$ bn %

Primary Deficit 233 3.8

Net Interest 5,000 81.4

Other 906 14.8

Total 6,139 100.0

FY2017 - FY2026 Cumulative Total
OMB's economic assumption of the 10-Year Treasury Note rates are from Table S-11 of “The FY2017 Mid-Session Review.” The fo

are the implied 10-Year Treasury Note rates on September 30 of that year.

1

1.5

2

2.5

3

3.5

4

4.5

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

10-Year Treasury Note Rate, %

Interest Rate Assumptions: 10-Year Treasury Note

OMB FY 2017 MSR Implied Forward Rates as of 09/30/2016

10-Year Treasury Rate of 1.63% as of 9/30/2016
Treasury’s primary dealer survey estimates can be found on page 11. OMB's projections of net borrowing from the public are from 

“The FY2017 Mid-Session Review.” CBO's estimates of the borrowing from the public are from Table 1 and 2 of “An Update to thEconomic Outlook: 2016 to 2026.” See table at the end of this section for details.

0

200400600800

1,0001,2001,400

2017

2018

2019

2020

2021

2022

2023

2024

2025

$ bn

Fiscal Year

Projected Net Borrowing Assuming Constant Future Issuan

Projected Net BorrowingCBO's "An Update to the Budget and Economic Outlook: 2016 to 2026"OMB's FY 2017 Mid-Session ReviewPD Survey Net Marketable Borrowing Estimates
Impact of SOMA Actions on Projected Net Borrowing Assuming 

Issuance Remains Constant

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

“The FY2017 Mid-Session Review.” CBO's estimates of the borrowing from the public are Table 1 and 2 of “An Update to the BudEconomic Outlook: 2016 to 2026.” See table at the end of this section for details.

0

200400600800

1,0001,2001,400

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

Fiscal Year

Without Fed Reinvestments ($ bn)

Projected Net BorrowingCBO's "An Update to the Budget and Economic Outlook: 2016 to2026"

0

200400600800

1,0001,2001,400

2017

2018

2019

2020

2021

2022

Fiscal Year

With Fed Reinvestm

OMB's FY 2017 Mid-Session PD Survey Marketable Borro
Additional Funding Gap Assuming No SOMA Roll

(181)

(362)

(390)

(259)

(204)

(98)

(450)(400)(350)(300)(250)(200)(150)(100)

(50)

0

2017

2018

2019

2020

2021

2022

$ bn

Fiscal Year

Assumes normalization will be complete by FY 2023, which implies no additional funding gap.
Historical Net Marketable Borrowing and Projected Net Borro

Assuming Future Issuance Remains Constant, $ billions

Net Borrowing capacity does not reflect SOMA reinvestments. Treasury’s primary dealer survey estimates can be found on page 11. OMB's projections of net borrowing from the public are from 

“The FY2017 Mid-Session Review.” CBO's estimates of the borrowing from the public are from Table 1 and 2 of “An Update to thEconomic Outlook: 2016 to 2026.”

Fiscal 

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

Historical/Projected 

Net Borrowing 

Capacity

OMB's FY 2017 MidSession Review

CBO's "An Upda

the Budget an

Economic Outlo

2016 to 2026"

2012 139 148 738 90 0 1,115 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 60 (84) 221 22 (0) 219 573 670 

2018 0 (20) 202 17 (6) 193 436 582 

2019 0 9 67 18 0 94 534 676 2020 0 (12) 83 (8) 0 63 530 757 2021 0 (54) 99 (25) 0 20 550 840 2022 0 36 133 (29) 0 140 652 987 2023 0 68 137 (27) 3 181 667 1,024 2024 0 11 159 (30) (0) 141 650 1,041 2025 0 (13) 156 (72) (2) 69 739 1,174 2026 0 (14) 168 (54) (0) 99 808 1,294 
Section IV:

Portfolio Metrics
Assumptions for Portfolio Metrics Section (pages 25 to 30) and A

• Portfolio and SOMA holdings as of 9/30/2016.• SOMA reinvestments until June 2018, followed by SOMA redemptions until and including 

2022. These assumptions are based on Chair Yellen’s December 2015 press conference and texpectations from the September FRB-NY survey of primary dealers. 

• To match OMB’s projected borrowing from the public for the next 10 years, Nominal Coupo

(2-, 3-, 5-, 7-, 10-, and 30-year) were adjusted by the same percentage. 

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

as of 9/30/2016. 

• OMB’s estimates of borrowing from the public are Table S-11 of the “Fiscal Year 2017 Mid-S

Review.”
This scenario does not represent any particular course of action that Treasury is expected to follow. Instead, it is intended to dem

basic trajectory of average maturity absent changes to the mix of securities issued by Treasury.

40455055606570758085

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Weighted Average Maturity (Months)

Calendar Year

Weighted Average Maturity of Marketable Debt Outstandi

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

70.0 months on9/30/2016

59.2 month(Historical from 1980 
This scenario does not represent any particular course of action that Treasury is expected to follow. Instead, it is intended to dem

basic trajectory of average maturity absent changes to the mix of securities issued by Treasury.

0

500

1,0001,5002,0002,5003,0003,5004,000

2017

2018

2019

2020

2021

2022

2023

2024

2025

$ bn

Projected Gross Borrowing excluding Bills for Fiscal Yea

Maturing in < 1 Year excluding Bills Projected Net Borrowing
This scenario does not represent any particular course of action that Treasury is expected to follow. Instead, it is intended to dem

basic trajectory of average maturity absent changes to the mix of securities issued by Treasury. See table on following page for de

05

10152025

2017

2018

2019

2020

2021

2022

2023

2024

2025

$ tr

Projected Maturity Profile from end of Fiscal Year

<= 1yr (1,2] (2,3] (3,5] (5,7] (7,10] > 10
This scenario does not represent any particular course of action that Treasury is expected to follow. Instead, it is intended to dembasic trajectory of average maturity absent changes to the mix of securities issued by Treasury. Portfolio composition by original 

and term can be found in the appendix (Page 45).

Recent and Projected Maturity Profile, $ billions

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

2009 2,702 774 663 962 559 643 695 2010 2,563 1,141 895 1,273 907 856 853 2011 2,620 1,334 980 1,541 1,070 1,053 1,017 2012 2,951 1,373 1,104 1,811 1,214 1,108 1,181 2013 2,939 1,523 1,242 1,965 1,454 1,136 1,331 2014 2,935 1,739 1,319 2,207 1,440 1,113 1,528 2015 3,097 1,775 1,335 2,382 1,478 1,121 1,654 2016 3,423 1,828 1,538 2,406 1,501 1,151 1,800 2017 3,537 2,049 1,539 2,466 1,499 1,195 1,960 2018 3,786 2,029 1,560 2,486 1,552 1,209 2,079 2019 3,771 2,122 1,655 2,586 1,630 1,277 2,216 2020 3,831 2,232 1,595 2,758 1,691 1,274 2,426 2021 3,941 2,151 1,817 2,797 1,716 1,313 2,645 2022 3,861 2,429 1,837 2,902 1,801 1,318 2,907 2023 4,139 2,426 1,884 2,920 1,860 1,336 3,185 2024 4,176 2,520 1,936 3,036 1,939 1,366 3,453 2025 4,230 2,612 1,938 3,305 1,959 1,398 3,751 2026 4,322 2,588 2,171 3,363 2,067 1,478 4,039 
This scenario does not represent any particular course of action that Treasury is expected to follow. Instead, it is intended to dem

trajectory of average maturity absent changes to the mix of securities issued by Treasury. See table on following page for details.

0%

10%20%30%40%50%60%70%80%90%

100%

2017

2018

2019

2020

2021

2022

2023

2024

2025

Percent Compositioin

Projected Maturity Profile from end of Fiscal Year

<= 1yr (1,2] (2,3] (3,5] (5,7] (7,10] > 10
Recent and Projected Maturity Profile, percent

This scenario does not represent any particular course of action that Treasury is expected to follow. Instead, it is intended to dembasic trajectory of average maturity absent changes to the mix of securities issued by Treasury. Portfolio composition by original 

and term can be found in the appendix (Page 45).

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

2009 38.6 11.1 9.5 13.7 8.0 9.2 9.9 2010 30.2 13.4 10.5 15.0 10.7 10.1 10.0 2011 27.2 13.9 10.2 16.0 11.1 10.9 10.6 2012 27.5 12.8 10.3 16.9 11.3 10.3 11.0 2013 25.4 13.1 10.7 17.0 12.5 9.8 11.5 2014 23.9 14.2 10.7 18.0 11.7 9.1 12.4 2015 24.1 13.8 10.4 18.5 11.5 8.7 12.9 2016 25.1 13.4 11.3 17.6 11.0 8.4 13.2 2017 24.8 14.4 10.8 17.3 10.5 8.4 13.8 2018 25.8 13.8 10.6 16.9 10.6 8.2 14.1 2019 24.7 13.9 10.8 17.0 10.7 8.4 14.5 2020 24.2 14.1 10.1 17.4 10.7 8.1 15.3 2021 24.1 13.1 11.1 17.1 10.5 8.0 16.1 2022 22.6 14.2 10.8 17.0 10.6 7.7 17.0 2023 23.3 13.7 10.6 16.4 10.5 7.5 17.9 2024 22.7 13.7 10.5 16.5 10.5 7.4 18.7 2025 22.0 13.6 10.1 17.2 10.2 7.3 19.5 2026 21.6 12.9 10.8 16.8 10.3 7.4 20.2 
Section V:

Demand
*Weighted averages of Competitive Awards.**Approximated using prices at settlement and includes both Competitive and Non-Competitive Awards. For TIPS’ 10-year equi

constant auction BEI is used as the inflation assumption.

Summary Statistics for Fiscal Year 2016 Q4 Auctions

Security 

Type Term Stop Out Rate (%)* Bid-to-Cover Ratio* Competitive Awards ($bn) % Primary Dealer* % Direct* % Indirect* Non-Competitive Awards ($bn) 

Bill 4-Week 0.256 3.5 585.3 61.2 7.1 31.7 3.6 Bill 13-Week 0.310 3.3 494.0 65.9 5.7 28.4 5.0 Bill 26-Week 0.443 3.5 427.1 50.5 2.5 47.0 5.0 Bill 52-Week 0.583 3.6 59.4 61.0 2.2 36.8 0.5 Bill CMBs 0.200 5.0 0.0 100.0 0.0 0.0 0.0 

Coupon 2-Year 0.757 2.7 77.5 44.4 18.2 37.5 0.5 Coupon 3-Year 0.854 2.8 71.9 37.9 10.0 52.1 0.1 Coupon 5-Year 1.145 2.4 101.9 33.6 5.1 61.3 0.1 Coupon 7-Year 1.384 2.5 84.0 29.4 9.5 61.1 0.0 Coupon 10-Year 1.569 2.4 63.0 30.3 6.4 63.3 0.0 Coupon 30-Year 2.304 2.3 39.0 29.3 8.2 62.5 0.0 

TIPS 5-Year (0.209) 2.4 14.0 30.5 7.3 62.2 0.0 

TIPS 10-Year 0.048 2.5 23.9 26.6 4.4 69.0 0.1 

FRN 2-Year 0.173 3.5 41.0 57.9 0.7 41.4 0.0 

Total Bills 0.336 3.4 1,565.9 59.8 5.2 35.0 14.1 

Total Coupons 1.239 2.5 437.1 34.6 9.5 55.9 0.9 

Total TIPS (0.047) 2.4 37.9 28.1 5.4 66.5 0.1 

Total FRNs 0.173 3.5 41.0 57.9 0.7 41.4 0.0 
1

1.5

2

2.5

3

3.5

4

4.5

5

5.5

6

Sep-06

Sep-07

Sep-08

Sep-09

Sep-10

Sep-11

Sep-12

Sep-13

Sep-14

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)
2

2.5

3

3.5

4

4.5

Sep-14

Oct-14

Nov-14

Dec-14

Jan-15

Feb-15

Mar-15

Apr-15

May-15

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

Bid-to-Cover Ratio

Bid-to-Cover Ratios for FRNs

(6-Month Moving Average)
1

1.5

2

2.5

3

3.5

4

4.5

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

Mar16

Bid-to-Cover Ratio

Bid-to-Cover Ratios for 2-, 3-, and 5-Year Nominal Securiti

(6-Month Moving Average)

2-Year 3-Year 5-Year
1

1.5

2

2.5

3

3.5

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

Bid-to-Cover Ratio

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

(6-Month Moving Average)

7-Year 10-Year 30-Year
1

1.5

2

2.5

3

3.5

Sep-06

Sep-07

Sep-08

Sep-09

Sep-10

Sep-11

Sep-12

Sep-13

Sep-14

Bid-to-Cover Ratio

Bid-to-Cover Ratios for TIPS

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

0%5%

10%15%20%25%30%

Sep-12

Nov-12

Jan-13

Mar-13

May-13

Jul-13

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

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 
Excludes SOMA add-ons. The “Other” category includes categories that are each less than 5%, which include Depository InstitutPension and Insurance.

0%5%

10%15%20%25%30%35%40%45%50%

Sep-12

Nov-12

Jan-13

Mar-13

May-13

Jul-13

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

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 
Excludes SOMA add-ons. The “Other” category includes categories that are each less than 5%, which include Depository InstitutPension and Insurance.

0%

10%20%30%40%50%60%

Sep-12

Nov-12

Jan-13

Mar-13

May-13

Jul-13

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

6-month moving average

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

by Investor Class (6-Month Moving Average)

Other Dealers and Brokers Investment Funds Foreign and International 
Excludes SOMA add-ons. The “Other” category includes categories that are each less than 5%, which include Depository InstitutPension and Insurance.

0%

10%20%30%40%50%60%70%

Sep-12

Nov-12

Jan-13

Mar-13

May-13

Jul-13

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

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 
Excludes SOMA add-ons. 

20%30%40%50%60%70%80%

Sep-12

Nov-12

Jan-13

Mar-13

May-13

Jul-13

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

% 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)
Excludes SOMA add-ons. 

0%5%

10%15%20%25%30%

Sep-12

Nov-12

Jan-13

Mar-13

May-13

Jul-13

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

% 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)
Foreign includes both private sector and official institutions.

0

20406080

100120

Sep-14

Oct-14

Nov-14

Dec-14

Jan-15

Feb-15

Mar-15

Apr-15

May-15

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

$ bn

Total Foreign Awards of Treasuries at Auction, $ billions

Bills 2,3,5 7,10,30 TIPS FRN
Appendix
This scenario does not represent any particular course of action that Treasury is expected to follow. Instead, it is intended to dem

trajectory of average maturity absent changes to the mix of securities issued by Treasury. See table on following page for details.

0%

10%20%30%40%50%60%70%80%90%

100%

2017

2018

2019

2020

2021

2022

2023

2024

2025

End of Fiscal Year

Projected Portfolio Composition by Issuance Type

Bills 2,3,5 7,10,30 TIPS (principal accreted to projection date) FRN
Recent and Projected Portfolio Composition by Issuance Type, 

This scenario does not represent any particular course of action that Treasury is expected to follow. Instead, it is intended to dembasic trajectory of average maturity absent changes to the mix of securities issued by Treasury. 

End of Fiscal 

Year Bills 2-, 3-, 5-Year Nominal Coupons 7-, 10-, 30-Year Nominal Coupons Total Nominal Coupons TIPS (principal a

to projection 

2009 28.5 36.2 27.4 63.6 7.9 2010 21.1 40.1 31.8 71.9 7.0 2011 15.4 41.4 35.9 77.3 7.3 2012 15.0 38.4 39.0 77.4 7.5 2013 13.2 35.8 43.0 78.7 8.1 2014 11.5 33.0 46.0 79.0 8.5 2015 10.6 29.4 49.0 78.3 8.8 2016 12.1 27.0 49.6 76.6 8.9 2017 12.0 26.7 50.2 76.9 8.8 2018 11.6 26.6 50.7 77.4 8.8 2019 11.2 27.2 50.7 77.9 8.7 2020 10.8 27.5 51.1 78.6 8.5 2021 10.4 27.7 51.6 79.4 8.2 2022 10.0 27.9 52.3 80.2 7.9 2023 9.6 28.1 52.9 81.0 7.5 2024 9.3 28.0 53.7 81.7 7.2 2025 8.9 28.0 54.6 82.7 6.7 2026 8.5 28.1 55.4 83.5 6.3 
*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 ($bn) % Primary Dealer* % Direct* % Indirect* Non- Competitive Awards ($bn) SOMA Add Ons ($bn) 

4-Week 7/7/2016 0.275 3.22 44.7 81.0 4.5 14.5 0.2 0.0 4-Week 7/14/2016 0.290 3.38 44.7 61.2 11.4 27.5 0.3 0.0 4-Week 7/21/2016 0.275 3.37 44.6 66.0 8.2 25.8 0.3 0.0 4-Week 7/28/2016 0.270 3.92 44.6 44.7 6.0 49.2 0.3 0.0 4-Week 8/4/2016 0.260 3.47 49.7 70.6 2.3 27.1 0.2 0.0 4-Week 8/11/2016 0.270 3.38 54.6 71.6 4.0 24.4 0.3 0.0 4-Week 8/18/2016 0.275 3.38 54.6 60.2 10.2 29.6 0.3 0.0 4-Week 8/25/2016 0.275 3.17 54.6 59.4 6.1 34.4 0.3 0.0 4-Week 9/1/2016 0.255 3.42 44.6 56.8 7.8 35.4 0.3 0.0 4-Week 9/8/2016 0.250 3.80 39.6 53.3 5.3 41.3 0.3 0.0 4-Week 9/15/2016 0.250 3.76 34.6 60.3 8.5 31.2 0.3 0.0 4-Week 9/22/2016 0.180 3.68 34.6 49.9 17.8 32.4 0.3 0.0 4-Week 9/29/2016 0.160 3.60 39.7 53.3 3.1 43.5 0.3 0.0 

13-Week 7/7/2016 0.270 3.39 33.5 73.1 3.2 23.7 0.4 0.0 13-Week 7/14/2016 0.310 2.98 36.6 67.3 5.1 27.6 0.4 0.0 13-Week 7/21/2016 0.320 3.21 36.5 61.1 6.9 32.1 0.4 0.0 13-Week 7/28/2016 0.320 3.34 35.7 68.0 3.0 29.0 0.3 0.0 13-Week 8/4/2016 0.285 3.33 36.4 64.5 3.7 31.8 0.4 0.0 13-Week 8/11/2016 0.305 3.42 39.4 69.0 5.3 25.6 0.4 0.0 13-Week 8/18/2016 0.300 3.20 39.4 53.8 5.0 41.2 0.4 0.0 13-Week 8/25/2016 0.310 3.30 39.4 58.2 7.2 34.6 0.4 0.0 13-Week 9/1/2016 0.335 3.30 39.3 72.4 2.7 24.9 0.4 0.0 13-Week 9/8/2016 0.335 3.30 39.5 69.8 2.4 27.7 0.4 0.0 13-Week 9/15/2016 0.375 3.23 39.4 63.8 2.7 33.4 0.4 0.0 13-Week 9/22/2016 0.305 3.40 39.4 58.4 17.5 24.1 0.4 0.0 13-Week 9/29/2016 0.250 3.42 39.3 78.3 8.9 12.8 0.4 0.0 26-Week 7/7/2016 0.340 3.67 28.5 51.0 2.5 46.5 0.3 0.0 26-Week 7/14/2016 0.390 3.07 31.6 50.9 3.5 45.6 0.4 0.0 26-Week 7/21/2016 0.430 3.28 31.3 60.1 4.3 35.6 0.5 0.0 26-Week 7/28/2016 0.425 3.84 30.6 39.9 1.7 58.4 0.4 0.0 26-Week 8/4/2016 0.395 3.50 31.4 56.3 2.6 41.1 0.4 0.0 26-Week 8/11/2016 0.440 3.82 33.2 39.2 2.6 58.2 0.5 0.0 26-Week 8/18/2016 0.445 3.23 33.4 50.1 0.7 49.2 0.5 0.0 26-Week 8/25/2016 0.450 3.23 33.4 57.4 2.5 40.0 0.4 0.0 26-Week 9/1/2016 0.480 3.80 32.7 35.1 1.6 63.3 0.3 0.0 26-Week 9/8/2016 0.470 3.27 35.5 60.7 1.4 37.9 0.3 0.0 26-Week 9/15/2016 0.540 3.30 35.5 56.8 1.7 41.5 0.3 0.0 26-Week 9/22/2016 0.500 3.41 35.4 54.9 1.2 43.9 0.4 0.0 26-Week 9/29/2016 0.420 3.65 34.6 43.0 5.8 51.3 0.4 0.0 52-Week 7/21/2016 0.550 3.65 19.8 79.5 2.6 17.9 0.2 0.0 52-Week 8/18/2016 0.570 3.59 19.8 49.1 1.9 49.0 0.2 0.0 52-Week 9/15/2016 0.630 3.48 19.8 54.5 1.9 43.6 0.2 0.0 

CMBs 8/17/2016 0.200 5.02 0.0 100.0 0.0 0.0 0.0 0.0 

Bills
*Weighted averages of Competitive Awards.**Approximated using prices at settlement and includes both Competitive and Non-Competitive Awards. For TIPS’ 10-Year Equ

constant auction BEI is used as the inflation assumption.

Issue Settle Date Stop Out Rate (%)* Bid-to-Cover Ratio* Competitive Awards ($bn) % Primary Dealer* % Direct* % Indirect* Non- Competitive Awards ($bn) SO

Ad

($

2-Year 8/1/2016 0.760 2.52 25.8 59.8 10.3 29.9 0.2 2-Year 8/31/2016 0.760 2.83 25.8 29.0 25.2 45.8 0.2 2-Year 9/30/2016 0.750 2.65 25.8 44.4 19.0 36.7 0.2 3-Year 7/15/2016 0.765 2.69 24.0 39.4 15.8 44.7 0.0 3-Year 8/15/2016 0.850 2.98 24.0 33.7 9.5 56.9 0.0 3-Year 9/15/2016 0.947 2.77 24.0 40.5 4.7 54.8 0.0 5-Year 8/1/2016 1.180 2.27 34.0 41.6 4.7 53.6 0.0 5-Year 8/31/2016 1.125 2.54 34.0 25.1 6.2 68.7 0.0 5-Year 9/30/2016 1.129 2.39 34.0 34.1 4.4 61.4 0.0 7-Year 8/1/2016 1.340 2.51 28.0 26.8 7.7 65.5 0.0 7-Year 8/31/2016 1.423 2.38 28.0 31.3 10.4 58.3 0.0 7-Year 9/30/2016 1.389 2.47 28.0 30.2 10.5 59.4 0.0 

10-Year 7/15/2016 1.516 2.33 20.0 37.7 7.9 54.3 0.0 10-Year 8/15/2016 1.503 2.43 23.0 20.2 7.6 72.2 0.0 10-Year 9/15/2016 1.699 2.35 20.0 34.5 3.4 62.1 0.0 30-Year 7/15/2016 2.172 2.48 12.0 23.1 8.4 68.5 0.0 30-Year 8/15/2016 2.274 2.24 15.0 27.7 10.9 61.5 0.0 30-Year 9/15/2016 2.475 2.13 12.0 37.5 4.6 57.9 0.0 

2-Year FRN 8/1/2016 0.174 3.82 15.0 55.6 0.3 44.1 0.0 2-Year FRN 8/26/2016 0.165 3.46 13.0 62.3 1.9 35.8 0.0 2-Year FRN 9/30/2016 0.180 3.09 13.0 56.2 0.0 43.8 0.0 

Issue Settle Date Stop Out Rate (%)* Bid-to-Cover Ratio* Competitive Awards ($bn) % Primary Dealer* % Direct* % Indirect* Non- Competitive Awards ($bn) SO

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($

5-Year TIPS 8/31/2016 (0.209) 2.37 14.0 30.5 7.3 62.2 0.0 

10-Year TIPS 7/29/2016 0.045 2.39 13.0 23.9 7.7 68.4 0.0 10-Year TIPS 9/30/2016 0.052 2.59 11.0 29.9 0.4 69.7 0.0 

Nominal Coupons

TIPS
Treasury Borrowing Advisory Committee Presentation

November 2016 

TBAC Charge: Money Market Fund Reform rules were implemented on October 14. Given that these reforms are neffective, we would like for the Committee to assess, over tshort and intermediate term, the market’s demand for Treasbills and other high quality liquid assets. How has demand shifted among the short-term products available to investorwhat are the implications for entities that rely on short-term funding? Given Treasury’s projected borrowing need what, any, changes to the existing auction schedule should Treasconsider in response to changes in demand for HQLA and Treasury bills?
Part 1: State of the Money Markets Post Reform
Yields on Money Market Securities (90-day maturities)

0.000.100.200.300.400.500.600.700.800.901.00

Oct '15 Nov '15 Dec '15 Jan '16 Feb '16 Mar '16 Apr '16 May '16 Jun '16 Jul '16 

Yield (%)

US T-Bill AA Non-Financial CP A1/P1 Certificate of Deposit Agency Discount Note Fed RR
2a7 Funds AUM

• Institutional Prime Funds assets have 

dropped $800bln over the last 1-year (85%)

• The flows have been almost dollar for 

dollar into Government Only Funds

STOCK

As of Date Total MMF Assets Govt Assets Prime Assets Govt Prime Govt 

10/19/2016 2,635 2,112 395 1,552 132 561 

9/21/2016 2,670 1,863 669 1,336 376 527 7/20/2016 2,715 1,519 1,007 1,061 651 458 4/20/2016 2,698 1,282 1,197 894 770 387 

10/21/2015 2,698 1,002 1,450 793 935 208 10/22/2014 2,619 962 1,402 757 870 205 

CHANGES

Total MMF Assets Govt Assets Prime Assets Govt Prime Govt 

1m (35) 249 (274) 215 (245) 34 3m (80) 593 (612) 491 (519) 102 

6m (63) 831 (802) 657 (638) 173 

1-yr (63) 1,111 (1,056) 758 (803) 352 

2-yr 16 1,150 (1,007) 795 (738) 356 

* Source ICI (Investment Company Institute)

Inst. RInst. R
Prime Funds 

• Yield spread b/w Prim

Government only fundrelatively constant sincDecember 2015

• This is primarily due to 

reducing their WAMs hOctober 14th reform da

• We are starting to see 

extend WAMs as outfl

• This should caus

differential to wid

• LIBOR curve ste

incentivizes WAM (1mL: 0.5359, 6m

• Outflows from Prime f

continued post Octobe

at a much slower pace

• It will likely take a yield 

around 40bps to attracinto Prime funds

0246810121416

0.000.050.100.150.200.250.30

Bps

Yield

CRANE GOVT INSTIT MF INDEX (LHS)CRANE PRIME INST MF INDEX (LHS)Spread (RHS)

* Source: Crane’s Data
Commercial Paper Market Has Shrunk Commercial paper supply has decreased as demand from Prime institutional fund

decreased

 Over the past year, market has decreased by $118bln

• Largest decline has been in the foreign financial category• Some of this drop had no real market impact because foreign banks were m

issuing at levels below IOER and then placing proceeds with Fed to earn IO

o Wider funding spreads have caused this arbitrage trade to become 

unprofitable

 Non-Financial issuers still remain well received by buyers given their attractive lev

and diversification (+16.9% in outstandings ytd)

• Short-Term Funding Markets remain open to issuers with appropriate pricing 

those issuers who benefited from structural demand from 2a-7 funds are simreducing their issuance/outstandings
Short-Term Funding Cost for Yankee Banks Has Increased

0.40%0.50%0.60%0.70%0.80%0.90% 3‐mo CD yields

French BanksJapanese BanksCanadian Banks

0.50%0.60%0.70%0.80%0.90%1.00%1.10% 6‐mo CD yields

Yankee banks have done five things to replace demand from Prime Funds1. Replace buyer base with new participants (asset managers, corporate cash accoun

• These buyers demand higher yields/spreads

2. Tap home office for funding

• Evident through increased (more negative) XCCY basis spreads

3. Term out debt 4. Mitigate overall funding needs, primarily through reduction in IOER arbitrage trades5. Raised deposit rates to attract more core deposits
Evidence of Yankee Banks Diversifying Their Sources Of Funding

There are signs that efforts to diversify sources of funding by Yankee Banks have affectpricing in other markets. Unlike 2011, current diversification efforts not only have had an impact on LIBOR/O

(funding spreads), but have also increased demand for USD funding from both 

Japanese and European borrowers

 Utilization of central bank swap lines as backstop source for USD funding 

remains very limited 
Bank Issuance to Prime Money Market Funds

Regional Summary

3/31/2016 6/30/2016 9/30/2016 3/31 ‐ 6/30 6/3

US 52 48 14 (4) Europe 138 111 33 (27) CA 123 93 43 (29) JPN 139 125 34 (14) Australia 31 22 15 (9) Total 484 400 140 ‐84 

Changes bet

• Japanese banks were the largest issuers of CD/CP to Prime Funds

• Over the past two quarters, they decreased issuance by $105bln

• European bank (in particular, French banks) were the second largest issuer

• Over the past two quarters they also decreased issuance by $105bln

• US banks were relatively small issuers of CP/CDs
Yankee Banks Have Termed Out $45Bln Since Aug 1

Source: Dealogic

Issue Date Issuer Security 

1-Aug Santander UK Holdings 5-Year Fixed-Rate Senior Notes 2-Aug Rabobank 3-Year Fixed- and Floating-Rate Senior Notes 3-Aug UBS Long 5-Year Fixed- and Floating-Rate Senior Notes 3-Aug Barclays Plc 5-Year Fixed- and Floating Rate & Tap of 5/12/2026 Senior Notes 8-Aug ING Bank 3-Year Fixed/Floating-Rate & 5-Year Fixed/Floating-Rate Senior Notes 

11-Aug Westpac Banking Corp. 3-Year Fixed/Floating-Rate, 5-Year Fixed/Floating-Rate & 10-Year Senior Notes 16-Aug Standard Chartered Plc 3-Year Fixed- and Floating-Rate & 10.5-Year Senior Notes 24-Aug Bank of Montreal 2-Year Fixed-Rate & 5-Year Fixed- and Floating-Rate Senior Notes 29-Aug Commonwealth Bank of Australia 2-Year Fixed-Rate & 5-Year Fixed/Floating-Rate & 10-Year Senior Notes 29-Aug Canadian Imperial Bank of Commerce 3-Year Fixed- and Floating-Rate Senior Notes 29-Aug Toronto Dominion Bank 2-Year Fixed-Rate Senior Notes 30-Aug Svenska Handelsbanken 3-Year Fixed- and Floating-Rate & 5-Year Fixed-Rate Senior Notes 31-Aug Danske Bank 3-Year Fixed- and Floating-Rate & 5-Year Fixed-Rate Senior Notes 

6-Sep Skandinaviska Enskilda Banken AB 3-Year Fixed- and Floating-Rate & 5-Year Fixed-Rate Senior Notes 6-Sep Mitsubishi UFJ Financial Group, Inc. 5-Year Fixed/Floating-Rate, 7-Year (Green) & 10-Year Senior Notes 6-Sep BNZ International Funding, Ltd. 5-Year Fixed- and Floating-Rate Senior Notes 7-Sep The Royal Bank of Scotland Group 7-Year Senior Notes 7-Sep Mizuho Financial 5-Year Fixed- and Floating-Rate & 10-Year Senior Notes 

13-Sep ABN Amro Bank 3-Year Fixed-Rate Senior Notes 22-Sep Nordea Bank 3-Year Fixed- and Floating-Rate Senior Notes 

Total Yankee Issuance 

What Have Issuers Done?
Impact on LIBOR and LIBOR / OIS

 3mo LIBOR / OIS widened by about 20 bps recently This increase is directly attributable to money market reform and increased fun

Yankee banks

 Expect forward 3mo LIBOR / OIS to remain elevated. 

• Forwards are trading at 35bps, compared to 15bps average over previo• Expect forward 3mo LIBOR / OIS to remain elevated. 

 As such, expect short-dated bank funding CP/CD levels out to 3m to 1-Ye

structurally elevated as issuers attempt to term out funding

• +15 to +30 bps wider versus prior periods

Forwar

3mo 6mo 9mo 

12mo 15mo 18mo 21mo 

Forward 

05101520253035404550

0

0.10.20.30.40.50.60.70.80.9

1

Bps

Yield

3mo Libor3mo Libor

/ OIS

(%)
Instrument (Notional in $bn) 9/30/2016 % 4/30/2016 % 12/31/2015 % $Chg from 

Fed ON RRP $317 16.3% $29 2.3% $205 17.2% $288 

Treasury Repo $229 11.8% $200 16.0% $86 7.2% $29 Agency Repo $187 9.6% $143 11.4% $102 8.6% $44 

Total Repo $734 37.7% $372 29.7% $394 32.9% $362 Agency Discos and Bullets $594 30.5% $417 33.3% $376 31.4% $177 Bills / Notes $613 31.5% $462 36.8% $424 35.5% $151 

VRDN $5 0.3% $1 0.1% $ 0.0% $4 Other MMF $2 0.1% $ 0.0% $ 0.0% $2 

Other $ 0.0% $1 0.1% $2 0.2% ‐$1 Total $1,948 100.0% $1,254 100.0% $1,196 100.0% $694 * Source: Crane Data, Money Fund Wisdom

Asset Breakdown of Government only 2a7 Funds

 The shift from Prime funds to Government only funds has increased demand for high quality l

(HQLA)

• The demand has been met by:

1. Repo (RRP / Dealer): + 340bln YTD2. Agency Discount Notes: +218bln YTD3. T-bills / Notes: +188bln YTD

(1) The $144bn increase in Treasury repo holdings by government-only funds is offset by $154bn decrease 

holdings by prime funds over the same period.
Due to regulatory changes, dealer balance sheets have been under pressure in recent years

contributed to a reduced availability of repo in the dealer market. Market participants and rebeen working to develop a central clearing platform for repo which should help alleviate baconstraints. In the meantime, the Fed’s RRP program has served as an important buffer.

Source: Federal Reserve Bank of New York, Federal Reserve Board 

1200130014001500160017001800190020002100

10 11 12 13 14 15 16

Bil. $

Primary Dealers Financing:Repos: Overnight/Continuing

30%35%40%45%50%55%60%65%70%

01 03 05 07 09 11 

Repo Assets/Total Assets (Left Repo Liabilities/Total Liabilities Net Repo Liabilities/Total Liabil

Dealer Balance Sheet Pressures
Fed’s RRP Facility Is Critical For Short-Term Markets

 Government only funds have increased usage of the Fed’s RRP facility as AUM 

have risen

 The average 1-month usage has increased by $150bln over last 6-months While not a perfect substitute for T-bills, RRP has become a key instrument for 

larger funds to manage inflows.

 If Fed’s RRP facility were to shrink dramatically or be discontinued there is a hig

probability that T-bill market would become dysfunctional

0102030405060

0

50

100150200250300350400450

Users

Billions

Usage of Fed's RRP Facility

Usage (LHS)1‐mo Avg Usage (LHS)1‐mo Avg Users (RHS)
Part 2: Money Market Reform and Treasury Bill Suppl
Source: US Treasury

5%

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

85 90 95 00 05 10 15

T-Bill % of Marketable Treasury Securities Outstanding (Left Scale)Average Maturity of Total Outstanding Marketable Debt (Right Scale)

T-bill Share of Treasury Market
Even pre-MMF reform, academic research suggested that Treasury should consider issuing more b

reasons have been offered: (1) financial stability considerations; and, (2) the existence of a T-bill ppremium seems to be especially large at the very short-end of the bill curve.

Note: The GHS estimate of the Tbill premium is based on the difference between actual T-bill yields and a curve that is fitted using all outstanding nominal T

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 

GHS Estimate of T-bill Premium (1983-2009)

Should Treasury Issue More Bills?
Source: US Treasury, Bureau of Economic Analysis

5%6%7%8%9%

10%11%12%13%14%15%

65 70 75 80 85 90 95 00 05 10 

T-Bills Outstanding, % of GDPLong-Term Average (Entire Sample)Pre-Crisis Average

T-bill Supply in Relation to the Size of the US Economy is Close to Lo
Source: US Treasury, Reuters

Fed Rate 

Hike

0.0%0.1%0.2%0.3%0.4%0.5%

Jan-13 Jan-14 Jan-15 Jan-16

1-Month Treasury Bill 1-Month OIS

Average 

Spread: 

12.9 bps

Average 

Spread: 

4.7 bps

Fed Rate 

Hike

0.0%0.1%0.2%0.3%0.4%0.5%

Jan-13 Jan-14 Jan-15 Jan

3-Month Treasury Bill 

How much of an impact did MMF reform have on the T-bill premiu
 GHS find that a 1 percentage point increase in the ratio of T-bills to GDP would lead 

bp increase in T-bill rates (with larger increases for very short term bills and lower fobills). So, offsetting a 7.5 bp premium would require a 0.625 percentage point of GDbill supply. At current levels of GDP, this translates to about $115bn.

 KV-J find that a one standard deviation increase in the ratio of T-bills to GDP would 

26 bp increase in T-bill rates. So, offsetting a 7.5 bp premium would require a $185bbill supply (assuming the standard deviation of the Tbills/GDP series is equal to KV-Jestimate of 0.02).

 Therefore, our back-of-the-envelope answer is: a $150bn increase in T-bill supply w

to offset the 7.5 bp premium associated with MMF reform.

Source: “A Comparative-Advantage Approach to Government Debt Management” by Greenwood, Hanson and Stein, JouAugust 2015 and “The Aggregate Demand for Treasury Debt” by Krishnamurthy and Vissing-Jorgensen, Journal of PoliticResearch presented at the Treasury’s Debt Management Conference in years can be used to provide an estimate of the impact of T-bill supply rates.

How Much Would T-bill Supply Need to Rise to Offset a 7.5 bp Pre
T-bill issuance rose sharply during FY2016. This was partly attributable to Treasury’s ad

higher cash balance target. Based on CBO’s estimated financing need and assuming thtarget is held at $350 bil, a further jump in T-bill issuance will be needed in FY2017 if cousteady. So, it appears that Treasury is well positioned to boost bill supply in the near term much as the $150 bil estimate associated with the impact of money market reform on the Longer run estimates suggest that coupon hikes would likely be needed by the end of the And, of course, any Fed redemptions would add to the Treasury’s estimated financing ne

Note: Assumes CBO estimate of financing need (August, 2016 Update), $350bn Treasury cash balance target, and no Fed redemptionsSource: Authors’ calculations

Required Change in Net T-bill Issuance, Holding Coupon Sizes Steady

FY Change in Tbills (Bil. $)

2016 (Actual) 289

2017 2942018 -42019 1802020 4082021 570

Baseline Financing Scenario: FY 2017-21
Source: US Treasury with authors’ estimates for 2017-21 using the baseline financing scenario and assumptions shown on the prior page.

Note: Obviously, the T-bill share would be lower and WAM higher to the extent that a portion of the required financing was met with coupon size in

5%

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

85 90 95 00 05 10 15 20

T-Bill % of Marketable Treasury Securities Outstanding (Left Scale)Average Maturity of Total Outstanding Marketable Debt (Right Scale)

T-bill Share & WAM Under a Baseline Financing Scenario
 The federal government debt limit, which was suspended by Congress and the Pres

November 2015, is set to be reinstated on March 16, 2017. Unless legislative action that date, the Treasury Department will be forced to reduce its cash balance to $23 bheld at the time of the debt ceiling suspension) . 

 Under a scenario in which Treasury was forced to draw down T-bill supply in order to 

cash balance, we estimate that the T-bill share of marketable debt outstanding (exclholdings) would decline to 13.8% -- versus 14.7% at the end of FY 2016. 

 Using the rule-of-thumb parameters developed earlier, such a supply shift would imp

bp decline in T-bill rates all else equal. The Fed’s RRP program may cushion this imsomewhat but probably not in its entirely because the program is not a perfect substSpecifically, not all investors participate in the Fed’s program (e.g., corporate Treasudaily limits for the counterparties who do participate ($30 bil), some investors find the costs associated with having to roll investments daily to be prohibitive, and investors as margin collateral (with relatively attractive haircuts). 

 The bottom line is that risks associated with supply disruptions to T-bill issuance – su

occur during a debt ceiling showdown – could be particularly severe in a post-money environment despite the existence of the Fed’s RRP program

Debt Ceiling Disruptions Pose a Risk
Conclusion

• Money market reform has triggered massive fund flows but no 

major price disruptions to date. 

• A number of factors have contributed to an orderly adjustment

including: 1) long lead time, 2) availability of Fed RRP and 3) strong demand for corporate credit (allowing some issuers to extend). 

• A modest near term boost in Treasury bill supply would help to 

alleviate pressures in the front end. This can be accomplished without shortening WAM. 

• Market participants and regulators should act quickly on centra

clearing for repo. This would be one of the best ways to increathe volume of HQLA available to the market.

• Debt ceiling disruptions could be particularly severe in a postmoney market reform environment.