Presentation to the Treasury Borrowing Advisory Committee U.S. - PowerPoint PPT Presentation

Presentation to the Treasury Borrowing Advisory Committee U.S. Department of Treasury Office of Debt Management February 1, 2011 U NITED S TATES D EPARTMENT OF THE T REASURY

Agenda • Fiscal Developments • Auction Demand & Market Trends • Portfolio Metrics • Long-term Challenges 2 U NITED S TATES D EPARTMENT OF THE T REASURY

U NITED S TATES D EPARTMENT OF THE T REASURY FISCAL DEVELOPMENTS 3

Steady Growth in Individual Tax Receipts Quarterly Tax Receipts Year-over-Year Percentage Change 60% A closer look at Q1 FY2011 ending Dec. 31, 2010 : 50% Corporate: +6% Withheld: +8% 40% Nonwithheld: +17% 30% 20% 10% 0% -10% -20% -30% -40% Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Jun-04 Sep-04 Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Corporate Taxes Withheld Taxes Nonwithheld Taxes Note: Adjusted for 9/11/01 Corporate Tax Receipts disruption Note: Data plotted is year-over-year changes in quarterly receipts Source: Monthly Treasury Statement 4 U NITED S TATES D EPARTMENT OF THE T REASURY

TARP Repayments Increased with Citi and GM Stock Sales TARP Cash Flows In Billions $ $125 $500 In June, over $68bn was repaid to the Capital Purchase Program by JPMorgan, Morgan Stanley, $100 $400 Goldman, US Bancorp, AMEX, BONY, BB&T, Capital One, State Street, and Northern Trust. $75 $300 In March, the Term Asset -Backed $50 $200 Lending Facility , a joint venture In December, Bank of America, The GM IPO returned $13.5 with the Federal Reserve, Wells Fargo, and Citi repaid billion to taxpayers. $25 $100 was launched. $90bn. $0 $0 In December, Treasury received $10.5 billion from the sale of Citi stock. -$25 -$100 The Automotive Industry Financing Program provided -$50 -$200 approximately $80bn in loans and equity investment. -$75 -$300 On October 14, 2008, the Capital Purchase Program was launched. By January 1, 2009, over $247bn in funds had been disbursed to U.S. banks. -$100 -$400 As of October 5, 2010, Treasury estimates that the total cost of TARP will be $28 billion. -$125 -$500 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Mar-09 Mar-10 Repayments, Dividends, Interest (LHS) Cash Outflows (LHS) Cumulative Net Cash Flow (RHS) 5 U NITED S TATES D EPARTMENT OF THE T REASURY

Non-Marketable Redemptions Slowed in Q1 FY2011 Net Non-marketable Issuance In Billions $ $30 $20 $10 $0 -$10 -$20 -$30 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2005 2006 2007 2008 2009 2010 2011 Savings Bond Foreign Series SLGS Source: Monthly Treasury Statement 6 U NITED S TATES D EPARTMENT OF THE T REASURY

Deficits Have Been Lower Year-over-Year through December Cumulative Budget Deficits by Fiscal Year In Billions $ 1,600 1,400 1,200 1,000 800 600 400 200 0 October November December January February March April May June July August September FY2009 FY2010 FY2011 Source: OMB for end of Fiscal Year, Monthly Treasury Statement for other months 7 U NITED S TATES D EPARTMENT OF THE T REASURY

Primary Dealer and Government Deficit Estimates FY 2011-2013 Deficit and Borrowing Estimates In Billions $ Primary Dealers* CBO OMB FY 2011 Deficit Estimate 1,363 1,480 1,416 FY 2012 Deficit Estimate 1,107 1,100 911 FY 2013 Deficit Estimate 932 704 736 FY 2011 Deficit Range 1,200-1,550 FY 2012 Deficit Range 1,000-1,200 FY 2013 Deficit Range 735-1,050 FY 2011 Marketable Borrowing Range 1,050-2,116 FY 2012 Marketable Borrowing Range 1,000-2,239 Estimates as of: Jan 2011 Jan 2011 July 2010 *Based on Primary Dealer feedback on January 24, 2011. Deficit estimates are averages. 8 U NITED S TATES D EPARTMENT OF THE T REASURY

Debt Outstanding is Approaching the Statutory Limit Total Public Debt Outstanding Subject to the Statutory Debt Limit In $ Trillions, as of January 31, 2011 Debt Subject to Limit Debt Limit 16 Current Debt Ceiling: $14.294 Trillion Current Debt: $14.079 Trillion Headroom: $215 Billion 14 12 10 8 6 4 1997 - Feb 1997 - Aug 1998 - Feb 1998 - Aug 1999 - Feb 1999 - Aug 2000 - Feb 2000 - Aug 2001 - Feb 2001 - Aug 2002 - Feb 2002 - Aug 2003 - Feb 2003 - Aug 2004 - Feb 2004 - Aug 2005 - Feb 2005 - Aug 2006 - Feb 2006 - Aug 2007 - Feb 2007 - Aug 2008 - Feb 2008 - Aug 2009 - Feb 2009 - Aug 2010 - Feb 2010 - Aug 9 U NITED S TATES D EPARTMENT OF THE T REASURY

U NITED S TATES D EPARTMENT OF THE T REASURY AUCTION DEMAND & MARKET TRENDS 10

Coverage Ratios Have Remained Strong in FY2011 Weighted Average Coverage Ratio on Notes and Bonds In Billions $, Coverage Ratio $2,500 3.5 $2,000 3.0 $1,500 2.5 $1,000 2.0 $500 1.5 $0 1.0 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011YTD Gross Private Issuance (LHS) Weighted Average Coverage Ratio (RHS) Note: Excludes TIPS and Bills issuance. Source: Treasury Auction Data; Through 1/31/2011 11 U NITED S TATES D EPARTMENT OF THE T REASURY

Smaller Dealers Have Increased Nominal Coupon Auction Participation FY2011 YTD: Average Investor Class Allotments Five-Year Average of Investor Class Allotments* Depository SOMA 3% Institutions 1% Individuals 1% SOMA 8% Foreign & International Foreign & 22% International 23% Primary Dealers Investment Funds Investment Funds 46% 14% 17% Primary Dealers 50% Other Dealers & Brokers Other Dealers & 11% Brokers 5% *FY2006 through FY2010 Source: Treasury Investor Class Data; Data through 1/15/2011 12 U NITED S TATES D EPARTMENT OF THE T REASURY

Smaller Dealers Have Also Increased Bill Auction Participation FY2011 YTD: Average Investor Class Allotments Five-Year Average of Investor Class Allotments* Individuals 2% SOMA 4% Other 1% Foreign & SOMA 11% Foreign & Individuals 4% International International 10% 14% Investment Funds Investment Funds 14% 14% Other Dealers & Brokers 7% Primary Dealers Other Dealers & 54% Brokers 12% Primary Dealers 53% *FY2006 through FY2010 Source: Treasury Investor Class Data; Data through 1/27/2011 13 U NITED S TATES D EPARTMENT OF THE T REASURY

U NITED S TATES D EPARTMENT OF THE T REASURY 14 PORTFOLIO METRICS

Nominal Coupons and Bills as a Percentage of the Portfolio Percentage of Total Portfolio Nominal Coupons Percentage of Total Portfolio Bills 50% 55% 60% 65% 70% 75% 80% 20% 25% 30% 35% 40% Jan-00 Jan-00 Average 2000 - 2007 Apr-00 Average 2000 - 2007 Apr-00 24% Jul-00 Jul-00 69% Oct-00 Oct-00 Jan-01 Jan-01 Apr-01 Apr-01 Jul-01 Jul-01 Oct-01 Oct-01 Jan-02 Jan-02 Apr-02 Apr-02 Jul-02 Jul-02 Oct-02 Oct-02 Jan-03 Jan-03 Apr-03 Apr-03 Jul-03 Jul-03 Oct-03 Oct-03 Jan-04 Jan-04 Apr-04 Apr-04 Jul-04 Jul-04 Oct-04 Oct-04 Jan-05 Jan-05 15 Apr-05 Apr-05 Jul-05 Jul-05 Oct-05 Oct-05 Jan-06 Jan-06 Apr-06 Apr-06 Jul-06 Jul-06 Oct-06 Oct-06 Jan-07 Jan-07 Apr-07 Apr-07 Jul-07 Jul-07 Oct-07 Oct-07 U NITED S TATES D EPARTMENT OF THE T REASURY Jan-08 Jan-08 Apr-08 Apr-08 Jul-08 Jul-08 Notes: Includes SFP and CMBs Notes: Includes SFP and CMBs Oct-08 Last: 73% as of 12/31/2010 Oct-08 Last: 20% as of 12/31/2010 Jan-09 Jan-09 Apr-09 Apr-09 Jul-09 Jul-09 Oct-09 Oct-09 Jan-10 Jan-10 Apr-10 Apr-10 Jul-10 Jul-10 Oct-10 Oct-10

Balances in the SFP Will Decline as the Debt Limit Approaches Treasury Supplementary Financing Program Cash Balance In Billions $ $800 $700 Projected $600 Max: $560B $500 $400 $300 3/31/11: Current: $200B Min: $5B $5B 12/30/09 $200 $100 $0 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-09 Mar-10 Mar-11 16 U NITED S TATES D EPARTMENT OF THE T REASURY

TIPS Issuance Will Continue to Increase TIPS Calendar Year Issuance in Billions $, Percentage of Portfolio $100 12% $75 9% $50 6% $25 3% $0 0% 1997 1999 2001 2003 2005 2007 2009 2011YTD 5 ‐ Year (L) 10 ‐ Year (L) 20 ‐ Year (L) 30 ‐ Year (L) TIPS as % of the Portfolio (R) Note: Data through 1/21/2011 17 U NITED S TATES D EPARTMENT OF THE T REASURY

The Ex-Post Cost of TIPS Issuance Continues to Decline In Billions $ Ex-Post TIPS Cost Since Program Inception 10 15 20 25 30 35 -5 0 5 1/1/1997 7/1/1997 1/1/1998 7/1/1998 1/1/1999 7/1/1999 1/1/2000 7/1/2000 1/1/2001 7/1/2001 1/1/2002 7/1/2002 1/1/2003 7/1/2003 18 1/1/2004 7/1/2004 1/1/2005 7/1/2005 1/1/2006 7/1/2006 1/1/2007 U NITED S TATES D EPARTMENT OF THE T REASURY 7/1/2007 1/1/2008 7/1/2008 1/1/2009 Note: Data through 3/1/2011 7/1/2009 1/1/2010 7/1/2010 1/1/2011