Presentation to the Treasury Borrowing Advisory Committee€¦ · Net financing projections for FY 2009-10 are based on internal estimates; projections for FY 2011-13 are based on

Presentation to the Treasury Borrowing Advisory Committee

U.S. Department of the TreasuryOffice of Debt Management

February 3, 2009

2Office of Debt Management

Fiscal Outlook


Borrowing requirements continue to grow

Fiscal Year to Date Deficits (monthly data)

-49

-162

-258

-148-121

-157 -163

-56

-154

-106-88

-311

-152

-319

-269

-371

-237

-455

-263

-122

-42

-80

-274

-81

-483

-402

-485-600

-500

-400

-300

-200

-100

0

Oct

-06

Nov

-06

Dec

-06

Jan-

07

Feb-

07

Mar

-07

Apr-

07

May

-07

Jun-

07

Jul-0

7

Aug-

07

Sep-

07

Oct

-07

Nov

-07

Dec

-07

Jan-

08

Feb-

08

Mar

-08

Apr-

08

May

-08

Jun-

08

Jul-0

8

Aug-

08

Sep-

08

Oct

-08

Nov

-08

Dec

-08

$ Billions

-100%

-50%

0%

50%

100%

150%

200%

250%

300%

350%

400%

2007 Y-O-Y % Change2008 2009


In the first quarter of FY2009, year-over-year growth in individual and corporate tax receipts was negative while outlay growth accelerated

Individual and Corporate Tax Receipts Fiscal Year to Date

0

200

400

600

800

1000

1200

1400

1600

1800

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

$ billions

0

200

400

600

800

1000

1200

1400

1600$ billions

FY 2006FY 2007FY 2008FY 2009

Total OutlaysFiscal Year to Date

0

500

1000

1500

2000

2500

3000


$ billions

0

500

1000

1500

2000

2500

3000

3500$ billions

FY 2006FY 2007FY 2008FY 2009


Declines in corporate tax receipts have generally preceded lower growth in individual withheld and non-withheld receipts

Rolling 12-Month Growth Rates

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

Dec-81 Dec-84 Dec-87 Dec-90 Dec-93 Dec-96 Dec-99 Dec-02 Dec-05

Corp Taxes WH Taxes nWH Taxes


D a i l y T r e a s u r y O p e r a t i n g C a s h B a l a n c e s

0

1 0 0

2 0 0

3 0 0

4 0 0

5 0 0

6 0 0

7 0 0

8 0 0

J a n - 0 8 F e b - 0 8 M a r - 0 8 A p r - 0 8 M a y - 0 8 J u n - 0 8 J u l - 0 8 A u g - 0 8 S e p - 0 8 O c t - 0 8 N o v - 0 8 D e c - 0 8 J a n - 0 9

$ b i l l i o n sD a t a t h r o u g h J a n 2 0 , 2 0 0 9

C a s h B a l a n c e w i t h S F P s

Cash balances remain volatile

Treasury Daily Operating Cash BalanceExcluding SFPs

0

25

50

75

100

125

150

175


$ billions

FY 2007FY 2008FY 2009

$ billions

Note: Data through January 20, 2009.

Orderly decline in SFP balance


And maturing securities continue to grow and add to financing needs

Coupons Maturing*February 15, 2009-May 15, 2038

0

10

20

30

40

50

60

70

80

15-F

EB

-200

928

-FE

B-2

009

15-M

AR

-200

931

-MA

R-2

009

15-A

PR

-200

930

-AP

R-2

009

15-M

AY

-200

931

-MA

Y-2

009

15-J

UN

-200

930

-JU

N-2

009

15-J

UL-

2009

31-J

UL-

2009

15-A

UG

-200

931

-AU

G-2

009

15-S

EP

-200

930

-SE

P-2

009

15-O

CT-

2009

31-O

CT-

2009

15-N

OV

-200

930

-NO

V-2

009

15-D

EC

-200

931

-DE

C-2

009

15-J

AN

-201

031

-JA

N-2

010

15-F

EB

-201

028

-FE

B-2

010

15-M

AR

-201

031

-MA

R-2

010

15-A

PR

-201

030

-AP

R-2

010

15-M

AY

-201

031

-MA

Y-2

010

15-J

UN

-201

030

-JU

N-2

010

15-J

UL-

2010

31-J

UL-

2010

15-A

UG

-201

031

-AU

G-2

010

15-S

EP

-201

030

-SE

P-2

010

15-O

CT-

2010

31-O

CT-

2010

15-N

OV

-201

030

-NO

V-2

010

15-D

EC

-201

031

-DE

C-2

010

15-J

AN

-201

115

-FE

B-2

011

28-F

EB

-201

131

-MA

R-2

011

15-A

PR

-201

130

-AP

R-2

011

31-M

AY

-201

130

-JU

N-2

011

31-J

UL-

2011

15-A

UG

-201

131

-AU

G-2

011

30-S

EP

-201

131

-OC

T-20

1115

-NO

V-2

011

30-N

OV

-201

115

-DE

C-2

011

31-D

EC

-201

115

-JA

N-2

012

31-J

AN

-201

215

-FE

B-2

012

29-F

EB

-201

231

-MA

R-2

012

15-A

PR

-201

230

-AP

R-2

012

31-M

AY

-201

230

-JU

N-2

012

15-J

UL-

2012

31-J

UL-

2012

15-A

UG

-201

231

-AU

G-2

012

30-S

EP

-201

231

-OC

T-20

1215

-NO

V-2

012

30-N

OV

-201

231

-DE

C-2

012

31-J

AN

-201

315

-FE

B-2

013

28-F

EB

-201

331

-MA

R-2

013

15-A

PR

-201

330

-AP

R-2

013

15-M

AY

-201

331

-MA

Y-2

013

30-J

UN

-201

315

-JU

L-20

1331

-JU

L-20

1315

-AU

G-2

013

31-A

UG

-201

330

-SE

P-2

013

31-O

CT-

2013

15-N

OV

-201

330

-NO

V-2

013

31-D

EC

-201

315

-JA

N-2

014

15-F

EB

-201

415

-MA

Y-2

014

15-J

UL-

2014

15-A

UG

-201

415

-NO

V-2

014

15-J

AN

-201

515

-FE

B-2

015

15-M

AY

-201

515

-JU

L-20

1515

-AU

G-2

015

15-N

OV

-201

515

-JA

N-2

016

15-F

EB

-201

615

-MA

Y-2

016

15-J

UL-

2016

15-A

UG

-201

615

-NO

V-2

016

15-J

AN

-201

715

-FE

B-2

017

15-M

AY

-201

715

-JU

L-20

1715

-AU

G-2

017

15-N

OV

-201

715

-JA

N-2

018

15-F

EB

-201

815

-MA

Y-2

018

15-J

UL-

2018

15-A

UG

-201

815

-NO

V-2

018

15-J

AN

-201

915

-FE

B-2

019

15-A

UG

-201

915

-FE

B-2

020

15-M

AY

-202

015

-AU

G-2

020

15-F

EB

-202

115

-MA

Y-2

021

15-A

UG

-202

115

-NO

V-2

021

15-A

UG

-202

215

-NO

V-2

022

15-F

EB

-202

315

-AU

G-2

023

15-N

OV

-202

415

-JA

N-2

025

15-F

EB

-202

515

-AU

G-2

025

15-J

AN

-202

615

-FE

B-2

026

15-A

UG

-202

615

-NO

V-2

026

15-J

AN

-202

715

-FE

B-2

027

15-A

UG

-202

715

-NO

V-2

027

15-J

AN

-202

815

-AP

R-2

028

15-A

UG

-202

815

-NO

V-2

028

15-F

EB

-202

915

-AP

R-2

029

15-A

UG

-202

915

-MA

Y-2

030

15-F

EB

-203

115

-AP

R-2

032

15-F

EB

-203

615

-FE

B-2

037

15-M

AY

-203

715

-FE

B-2

038

15-M

AY

-203

8

$ Billions

10 YR IIS NOTE 10 YR NOTE 2 YR NOTE20 YR IIS BOND 3 YR NOTE 30 YR BOND30 YR IIS BOND 5 YR IIS NOTE 5 YR NOTE

*Based on coupon securities outstanding as of January 13, 2009.

In the next 5 years, 56 days will have maturities greater than $20 billion and 22 days greater than $30 billion.


Primary dealer estimates of the FY 2009 deficit rose to $1.6 trillion from $988 billion ahead of the November refunding

FY 09 Deficit Estimates $ billionsPrimary Dealers* CBO OMB

Current: 1626 1186 482Range based on average absolute forecast error** 1535-1717 1086-1286 391 - 573Estimates as of: January 09 January 09 July 08* Primary Dealers reflect average estimate.** Ranges based on errors from 2004-2008.*** Based on Primary Dealer feedback on January 29, 2009.


SFP related financing and funding needs have led to higher bill issuance, including cash management bills

Total Private Bills Maturing

$50

$55

$60

$65

$70

$75

$80

$85

$90

Mar-08 Jun-08 Sep-08 Dec-08 Mar-09

Bill

ions

Bills Outstanding

Total

SOMA

Private

$0

$400

$800

$1,200

$1,600

Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08

Bill

ions

Bills: Issued and Net Cash Raised

-

1,000

2,000

3,000

4,000

2005 2006 2007 2008

FY

Am

ount

($, b

n)

Rollover Net cash

CMBs and SFP Outstanding(as of 1/31/09)

-$100

$0

$100

$200

$300

$400

$500

$600

$700

$800

7/1

8/1

9/1

10/1

11/1

12/1 1/1

2/1

3/1

4/1

5/1

6/1

7/1

8/1

9/1

10/1

11/1

12/1 1/1

Bill

ions

CMBs SFPs


Growing financing needs resulted in significant borrowing via coupons

Total Net Coupons Issued

FY08, $227

FY07, $91

FY09, $272

-$50

$0

$50

$100

$150

$200

$250

$300

10/1 12/30 3/29 6/27 9/25

Bill

ions


Existing coupon securities continue to increase to larger, more liquid benchmark sizes

Coupon Issuance in 2007-2009

10

15

20

25

30

35

40

45

50

55

Sept-07

Oct-07

Nov-07

Dec-07

Jan-08

Feb-08

Mar-08

Apr-08

May-08

Jun-08

Jul-08

Aug-08

Sept-08

Oct-08

Nov-08

Dec-08

Jan-09S

ize

(bill

ions

, $) 2-Year (Monthly)

10-Year (ro lling total o f las t 3 months)

5-Year (Monthly)

30-Year(roll ing total of l ast 6 months)

3-Year (Monthly)


The amount of debt due to mature within 5 years rose between December 2007 and December 2008

Debt Due to Rollover Within N Years

End of '08

End of '07

End of '06

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

0 5 10 15 20 25 30 35

Years Forward

Deb

t Mat

urin

g(B

illio

ns)


The average maturity of marketable debt outstanding fell in the first quarter of FY 2009 as short-term issuance increased

Average Maturity of Marketable Debt Outstanding

20

30

40

50

60

70

80

90

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

months

Quarterly data are actuals through December 31 , 2008.

49 months as of December 31, 2008


The shares of all securities outstanding other than bills have fallen while the share of bills outstanding has grown to address near term financing needs

Distribution of Marketable Debt Outstanding by SecurityFiscal Year

0%

5%

10%

15%

20%

25%

30%

35%

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 20070%

5%

10%

15%

20%

25%

30%

35%

BILLS 2-3 YR NOTES 4-7 YR NOTES 8-10 YR NOTES BONDS TIPSNet financing projections for FY 2009-10 are based on internal estimates; p rojections for FY 201 1-13 are based o n OM B 2009 MSR Budget estimates. Future residualfinancing needs are spread proportionally across auctioned securities and are derived from hypo thetical auction sizes. Initia l sizes are based o n announced coupon amounts as of January 15, 2009 and assume the outstanding level of b ills on December 31, 20 08. All projections exclude CMB issuance and maturing amounts.


Treasury continues to monitor developments in inflation-indexed markets

Potential Cost / Benefit of the Most Recently Auctioned TIPS versus Comparable Nominal Treasuries under Various Inflation Scenarios

-3,000

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

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

Hypothetical Inflation over Remaining Life of Security at Auction

Cos

t (+)

/ Sa

ving

(-) v

ersu

s E

quiv

alen

t N

omin

al ($

,mm

)

October 5-Year January 10-Year January 20-Year

Survey of Professional Forecasters

Breakeven Inflation Rates


The Treasury repo market, after experiencing dislocations, is gradually readjusting with volumes increasing and fails plateauing


Adjusting the auction calendar should be considered to address borrowing needs

Security Recent Size, $ Billions4-week, 13-week, and 26-week bills 32, 29, 2852-week bills 22 per month

2-year note 40 per month3-year note 30 per month5-year note 30 per month10-year note 52 (20 initial + 16 + 1st reopening + 16

2nd reopening)

30-year bond 20 (10 initial + 10 reopening)

5-year TIPS 14 (8 initial + 6 reopening)10-year TIPS 14 (8 initial + 6 reopening) 20-year TIPS 14 (8 initial + 6 reopening)

Cash Management Bills 39 (average size in FY 2009)(including SFP)

Announced through 1/27/09


Treasury is expecting to make further changes to the auction calendar as a result of increased financing needs.

What adjustments to the current securities offerings should Treasury make at this time that would be easily introduced and provide increased flexibility?

Treasury Borrowing Advisory CommitteePresentation to the U.S. Treasury

February 3,2009

Page 1

��

Source: Haver Analytics

Federal Withheld Tax Receipts (Year-to-Year Pct Chg) and Unemployment Rate

-6

-4

-2

0

2

4

6

8

10

12

Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

Withheld Taxes (Left) Unemployment Rate (Right, Scale Inverted)

Page 2

��

Source: Bloomberg Indices

FY2006 FY2007 FY2008 FY2009(Billions USD)

Budget Position -248 -161 -455 -1,750Net Borrowing 218 145 788 2,500Debt Outstanding 4,303 4,448 5,236 7,736

(% GDP)Budget Position -1.9% -1.2% -3.2% -12.0%Net Borrowing 1.7% 1.1% 5.5% 17.5%Debt Outstanding 33.1% 32.6% 36.8% 53.5%

Page 3

�� !��

TSY Net Borrowing Needs as Pct of Nominal GDP -- Including Range of Estimates For 2009 Scenarios

-8

-4

0

4

8

12

16

20

24

1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010

Forecasted Range for 2009: 18% of GDP

Best Estimate


Page 4

��"�� #��

Source: US Federal Reserve, Bloomberg

Spread Between the Funds Rate and 30-Year Treasury Yield (Basis Points) and the Federal Funds Rate

0

2

4

6

8

10

12

14

16

1982 1985 1988 1991 1994 1997 2000 2003 2006 2009-200

-100

0

100

200

300

400

500

600

Funds Rate (left) Funds - Bonds (right)

Page 5

��#��

Source: Various US Government Agencies

Allocated Amount SizeFederal Reserve - $5.255 trillion - 62%

Commercial Paper Funding Facility LLC (CPFF) 1,800,000,000,000 21% Holdings down $100B from peak to $250BTerm Auction Facility (TAF) 900,000,000,000 11%Other Assets 601,963,000,000 7%Unnamed MBS and GSE Program 600,000,000,000 7% Fed may hike size of purchasesMoney Market Investor Funding Facility (MMIFF) 540,000,000,000 6%Term Securities Lending Facility (TSLF) 250,000,000,000 3%Term Asset Backed Securities Loan Facility (TALF) 200,000,000,000 2% February launch - size may riseDiscount Window 139,211,000,000 2% Borrowing on downward trendOther Credit Extensions (AIG) 122,800,000,000 1%ABCP Money Market Fund Liquidity Facility (AMLF) 61,900,000,000 1%Net Portfolio Maiden Lane LLC (Bear Sterns) 28,800,000,000 0%Securities Lending Overnight 10,300,000,000 0% Program being little used following CP/MM facility introductionSecondary Credit 118,000,000 0%

5,255,092,000,000 62%

Federal Deposit Insurance Corporation - $1.788 trillion - 21%FDIC Liquidity Guarantees 1,400,000,000,000 16% $150 billion in debt issued to dateLoan Guarantee to Citigroup 249,300,000,000 3%Loan Guarantee to Lending arm of General Electric 139,000,000,000 2%

1,788,300,000,000 21%

Treasury Department - $1.15 trillion - 13.5%Troubled Asset Relief Program (TARP) 700,000,000,000 8% Second $350B tranche just requestedFannie Mae / Freddie Mac Bailout 200,000,000,000 2%Stimulus Package and Bank Tax Breaks 197,000,000,000 2% Package provide only temporary boostTreasury Exchange Stabilization Fund (ESF) 50,000,000,000 1%

1,147,000,000,000 14%

Federal Housing Administration - $300 billion - 3.5%Hope For Homeowners 300,000,000,000 4%

Total - 100% 8,490,392,000,000 100%

Page 6

�$%��%��&�$�'�

Source: Citigorup, Bloomberg; Note: Potential issuance only includes term debt that is eligible for the program. Commercial Paper and other money market instruments may significantly increase the potential size of the market.

Selected Senior Unsecured Debt Outstanding as of 1/27/09Debt Maturing 2009

($mm) (%) ($mm)

Bank of America 24,850 16.8% 72,677GE 24,271 16.5% 60,248JP Morgan Chase & Co. 20,760 14.1% 43,836Citi 18,350 12.4% 38,611Other Banks 15,206 10.3% N/AGoldman Sachs Group 15,017 10.2% 26,467Morgan Stanley 14,575 9.9% 18,621American Express Co. 5,900 4.0% 15,520Sun Trust Banks Inc. 3,000 2.0% 4,396PNC Financial Services 2,900 2.0% 7,337HSBC USA 2,675 1.8% 51,005GMAC 0 0.0% N/ANational City Corp 0 0.0% 3,914US Bancorp 0 0.0% 4,285

Grand Total 147,504 100.0% 346,917

Issuance

Page 7

��(��"��#�'��$�'��#��

Source: IMF World Economic Outlook Database; Note: 2008 values for Germany, Japan and UK are IMF estimates; 2009 observations are estimates

Select Countries: Public Debt Outstanding as a Share of GDP

0

50

100

150

200

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

Germany Japan UK US

Page 8

��)��$�'��*��%��'��

% Total US Debt Held by Foreigners

30%

35%

40%

45%

50%

55%

60%

Mar-00 Dec-00 Sep-01 Jun-02 Mar-03 Dec-03 Sep-04 Jun-05 Mar-06 Dec-06 Sep-07 Jun-08

Source: US Department of Treasury, Haver Analytics

Page 9

��)��$�'��*��%��'��

China and Japan Account for More Than Half of the Total

Source: US Department of Treasury; Note: As of November 2008

US Treasury Holdings Abroad (Bil USD)

China, Mainland27%

Japan24%

United Kingdom15%

Carib Banking Centers

9%

Oil Exports8%

Switzerland3%Hong Kong

3%

Brazil5%

Russia3%

Luxembourg3%

US Treasury Holdings Abroad (Bil USD)

0 100 200 300 400 500 600 700 800

China, Mainland

Japan

United Kingdom

Carib Banking Centers

Oil Exports

Brazil

Russia

Luxembourg

Hong Kong

Switzerland

Page 10

��#��)��+��*��


China: Net Foreign Purchases in Long-Term US Securities (Billion USD)

0

50

100

150

200

250

300

Jan-00 Sep-00 May-01 Jan-02 Sep-02 May-03 Jan-04 Sep-04 May-05 Jan-06 Sep-06 May-07 Jan-08 Sep-080

50

100

150

200

250

300

Twelve-Month Annual Rate Six-Month Annual Rate

Page 11

$��%��'��

Source: Bloomberg Indices

Date Reserves (mil USD) % WorldWorld 1/30/2009 6,757,009

China 12/31/2008 1,946,030 29%Japan 12/31/2008 1,003,300 15%India 1/23/2009 238,305 4%Taiwan 12/31/2008 291,710 4%South Korea 12/31/2008 201,220 3%

Brazil 1/29/2009 201,572 3%Mexico 1/23/2009 84,045 1%US 1/23/2009 40,836 1%Argentina 11/30/2008 44,063 1%Canada 10/31/2008 39,634 1%

Russia 1/23/2009 386,500 6%Eurozone 11/30/2008 204,202 3%Poland 9/30/2008 70,981 1%Turkey 1/23/2009 66,914 1%Norway 10/31/2008 38,323 1%

Asia

Americas

Europe

Page 12

��%��!��

T-Bill Share of Total Marketable Debt

15%

20%

25%

30%

35%

40%

1980 1983 1986 1989 1992 1995 1998 2001 2004 2007

Avg Maturity of Total Outstanding Marketable Debt (Months)

40

45

50

55

60

65

70

75

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007

Source: US Department of Treasury, Haver Analytics

Page 13

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Source: Federal Reserve Bank of New York

Latest

BNP Paribas Securities Corp.Banc of America Securities LLCMerrill Lynch Government SecuritiesBarclays Capital Inc.Cantor Fitzgerald & Co.Citigroup Global Markets Inc.Credit Suisse Securities (USA) LLCDaiwa Securities America Inc.Deutsche Bank Securities Inc.Dresdner Kleinwort Securities LLCGoldman, Sachs & Co.Greenwich Capital Markets, Inc.HSBC Securities (USA) Inc.J. P. Morgan Securities Inc.Mizuho Securities USA Inc.Morgan Stanley & Co. IncorporatedUBS Securities LLC.

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Documents

Presentation to the Treasury Borrowing Advisory Committee€¦ · Net financing projections for FY 2009-10 are based on internal estimates; projections for FY 2011-13 are based on