Quarterly Refunding Charts May 2, 2005 Office of Debt Management

Current Financing
• FY 2005 Q3 and Q4 Outlook: – Estimated net marketable paydown of $42 billion this quarter and net marketable borrowing of $103 billion next quarter The Q3 estimated paydown is $54 billion less than we expected in January

2

Treasury Financing Requirements
($ Billions) January - March 2005
(Projected) (Actuals)

April - June 2005
(Projected)

Deficit Funding (Def + / Surplus -) Means of Financing Change in Cash Balance Net Non-Marketable Financing Net Marketable Financing Other* Net Marketable Financing Bills Nominal Notes TIPS Bonds
Notes: Starting Cash Balance Ending Cash Balance

178

177

-10

Non-marketable financing (SLGS) was higher than expected. Financing broadly distributed across bills, notes and TIPS.

15 5 147 11 147

2 17 144 14 144 56 70 21 -2

2 16 -42 14 -42

25 10

25 22

22 20

* Includes direct loan activity, changes in accrued interest and checks outstanding and minor miscellaneous transactions. Note: Totals may not add due to rounding

April individual tax receipts were greater than anticipated. $22.5 billion end of March balance.

T r e a s u r y D a ily O p e r a tin g C a s h B a la n c e
$ b illio n s 90

$ b illio n s
90

80

FY 2003 FY 2004 FY 2005

N o te : D a ta th r o u g h A p r il 2 8 , 2 0 0 5

80

70

70

60

60

50

50

40

40

30

30

20

20

3

10

10

0 O ct Nov Dec Jan Feb M ar Apr M ay Jun Jul Aug Sep

0

$ b illio n s 160
52 .1 74.4

T reasury Q uarterly N et M arket B orrow ing C alendar Q uarter
145 .9 84.2 11 1.3 81.5 31 .3 52.5 15.1 1 13.4

$ b illio n s
144 .2

1 60

120

97 .8 82 .6 60 .3 89.0

1 20

80

80

Financing needs continue to be met by net new issuance across the nominal and TIPS curves. Small pay downs in 2-yr notes and nominal bonds.

40

40

0

0

-4 0

-4 0
17.8

-8 0

-8 0

B uyb acks
-1 2 0

O ver 10 years
5-10 ye ars
2-under 5 years
-1 63.4

-1 2 0

-1 6 0

-1 6 0

B ills
-2 0 0 III IV I-0 2 II III IV I-0 3 II III IV I-0 4 II III IV I-0 5

-2 0 0 I-0 1 II

Treasury Quarterly Net Borrowing from Nonmarketable Issues
$billions

Calendar Quarter

$ billions 16.6

20
State and Local Govt. Series
Savings Bonds

20

15

15

Record net new cash raised in State and Local Govt. Series (SLGS) issuance.

10

7.6

Foreign Series

7.6 4.5 3.9

10

5
0.8 1.1 0.8

5

0
-1.7 -0.1 -0.7 -2.4

0

-5
-8.0

-2.2 -5.0

-1.4 -5.5

-5
-6.0 -8.4

-10

4
-15 I 00 II

-10.1

-10

-10.6

-15 III IV I 01 II III IV I 02 II III IV I 03 II III IV I 04 II III IV I 05

30 P erc en tag e o f G D P

D rivers o f F in a n c in g N e ed s

P ercen tag e o f G D 3 0 P

25

25

A verag e H isto rical D ifferen ce: 2%

Forecasts for fiscal improvement remain intact.

20

20

15

10

O u tlays R even u e G D P G ro w th N et In tere st

15
E stim a te d

10

5

5

0

0

S O U R C E : O M B B u d g et F Y 2 006
-5 1960 -5 1965 1970 1975 1979 1984 1989 1994 1999 2004 2009

P ro je c te d N e t M a r k e ta b le B o r ro w in g a n d H y p o th e tic a l B ill A u c tio n S iz e s
A v e ra g e A n n o u n c e d A 5 c tio n S iz e 4u $ B illio n s If C o u p o n A u c tio n S iz e s H e ld C o n s ta n t N e t B o rro w in g 5 $ B illio n s 0 0
4 -w e e k
1 3 -w e e k

At current coupon levels bill issuance rises in FY 2009 due to increased rollover, despite declining deficits.

40 35 30 25 20 15 10 5 0

N e t M a rk e ta b le B o rro w in g (R H S )

450 400 350 300 250 200 150 100 50

2 6 -w e e k

5

2005

2006

2007

2008

2009

2010

A ssu m e s O M B 's F Y 2 0 0 6 B u d g e t d e fic it p ro je c tio n s (e x c e p t in te rn a l T re a s u ry e stim a te u se d fo r F Y 0 5 ) a n d c o u p o n a u c tio n siz e s re m a in a t m o st re c e n tly a n n o u n c e d a m o u n ts. B ill issu a n c e siz e s a re sh o w n in fix e d sh a re s to m e e t re sid u a l fin a n c in g n e e d s.

Projected Net Marketable Borrowing and Hypothetical Auction Sizes
If Bill Issuance held Constant at FY 2005 Level Announced 45 auction sizes $ billions 40 Net borrowing 450 $ billions 400 Net Marketable Borrowing (RHS)

Coupon sizes show manageable growth under budget deficit projection and constant bill issuance.

35

350

30

300

25

250

20

200

15

150

10

100

5

50

0 2005 BILLS 2-YEAR 2006 3-YEAR 5-YEAR 2007 10-YEAR 2008 5-YEAR TIPS 2009 10-YEAR TIPS 2010 20-YEAR TIPS

0

* *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).

6

Debt Portfolio
Assuming coupon levels held constant and new budget projections: • • Average maturity of issuance rises on 20-year TIPS issuance Maturity of total outstanding drops from around 4.5 years to less than 4 years over the next 5 years The percent of debt maturing with 3 years or less to maturity would reach nearly 63%

7

DEBT MATURITY MEASURES
months 90

1/
months

Average Maturity of Issuance

90

The combination of continued residual bill financing and maturing bonds results in the decline of the average maturity of debt outstanding.

80
(Projected)

80

70

70

60
53.3

60

50

50

Average Maturity
As of March 31, 2005

40
Assumptions: FY06 OMB Budget (except internal Treasury estimate used for FY05) and coupon issuance maintained at current levels.

36.8

40

30

30

20
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008

20
2010

1/ The average maturity of issuance is the ultimate average maturity achieved if coupon issuance in any given quarter is held constant going forward and the balance of financing needs are met with changes in bill issuance. (4 quarter moving average).

80% 70% 60%

Percentage Breakdown of Annual Issuance

80% 70% 60% 50%

Bills as a percentage of total annual issuance are projected to increase.

50%

Projected
40% 30% 20% 10% 0% 1980 40% 30% 20% 10% 0% 2010

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

8

Bills

2-3 yrs

4-7 yrs

10-yrs

Bonds

TIPS

Projections based on OMB's FY 2006 Budget (except internal Treasury estimate used for FY05) and assumes coupon auction sizes remain at most recently announced amounts. Residual amounts financed with bills.

Distribution of Marketable Debt Outstanding by Security
35% 35%

30%

30%

2- and 3- year notes outstanding are expected to temporarily exceed bills outstanding at the end of FY 2005. TIPS growth continues.

25%

25%

20%

20%

15%

15%

10%
Projected

10%

5%

5%

0% 1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

0% 2010

BILLS

2-3 YR NOTES

4-7 YR NOTES

8-10 YR NOTES

BONDS

TIPS

If residuals are financed with bills, then maturing debt with 1-3 years is increasing, consistent with declining average maturity.

Projections based on OMB's FY 2006 Budget (except internal Treasury estimate used for FY05) and assumes coupon auction sizes remain at most recently announced amounts. Residual amounts financed with bills.

Percentage of Debt Maturing in Next 12 to 36 Months
75% 70% 65% 60% 55% 50% 45% 40% 35%
Projected

75% 70% Maturing in 36 Months 65% 60% Maturing in 24 Months 55% 50% 45% Maturing in 12 Months 40% 35% 30% 25% 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

30% 25% 1980

9

Projections based on OMB's FY 2006 Budget (except internal Treasury estimate used for FY05) and assumes coupon auction sizes remain at most recently announced amounts. Residual amounts financed with bills.

$ Billions
500
Buybacks
over 10 years

Treasury Annual Net Market Borrowing
500

400

400

On a net basis 2- and 3-year notes are expected to provide minimal new cash after FY 2006.

300

5-10 years
2-under 5 years

300

200

Bills

200

100

100

0

0

-100
Projected

-100

-200

-200

-300
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Projections are based on FY 2006 OMB's Budget (except internal Treasury estimate used for FY05) and assumes coupon auction sizes remain at most recently announced amounts. Residual amounts financed with bills.

-300

10

Uncertainty
• FY 2006 forecast shows modestly larger residual financing needs from 2006-2010 FY 2005 residual financing need has fallen due to improved receipts and record SLGS issuance

11

FY 05 Deficit Estimates
($ Billions)
Primary dealer estimates have risen slightly.

Primary Dealers Current: Range based on average absolute error Estimates as of:
Note: Ranges based on Errors from 1997-2004
F in a n c in g R e s id u a ls G iv e n C u r r e n t I s s u a n c e C a le n d a r

CBO 365

OMB 427 342-512

382

329-435 264-466

April 28, 05 March 05 February 05

FY 2005 residual has declined due to stronger than expected receipts and net SLGS issuance.

A s s u m e s c u r r e n t c o u p o n i s s u a n c e p a t te r n a n d i s s u a n c e a m o u n t- - W e e k l y b i l l is s u a n c e a t l e v e l s r e q u ir e d to m a i n t a i n o u t s ta n d i n g F Y $ a m o u n t s e q u a l t o S e p te m b e r 3 0 , 2 0 0 4 t o t a l o u ts t a n d in g
$ b illio n s $ b illio n s

700
N o te : F Y 2 0 0 5 N e t F in a n c in g a m o u n t is a n in te r n a l T r e a s u r y e s tim a te .

700

600

N e t f in a n c in g p lu s a v e r a g e a b s o lu t e e r r o r in O M B e s tim a te

600

500
N e t f in a n c in g im p lie d b y F Y 0 6 O M B B u d g e t d e f ic it f o r e c a s t

500

400

400

300
N e t f in a n c in g m in u s a v g . a b s o lu te e r r o r in O M B e s t.

300

200

200

100

100

0
B a r s i n d ic a te e s tim a te d c h a n g e in f in a n c in g r e q u ir e d in g iv e n y e a r f o r d if f e r e n t d e f ic it o u tc o m e s

0

-1 0 0

-1 0 0

12

-2 0 0
N o te : A v e r a g e h is t o r ic a l e r r o r s w e r e e s t im a te d w it h a li n e a r l e a s t- s q u a r e s r e g r e s s i o n u s i n g O M B 's b u d g e t f o r e c a s ts s in c e t h e 1 9 8 9 B u d g e t a n d t h e M S R s in c e 1 9 9 8 .

-2 0 0

-3 0 0

-3 0 0 2010

2005

2006

2007 F is c a l Y e a r s

2008

2009

Capital Markets
• • Foreign holdings of Treasury debt continue at historical highs, but are comparable to foreign holdings of other G-7 countries Treasuries represent a stable proportion of the U.S. credit market

13

Percent 60%

Foreign Holdings as a Percent of Total Privately Held Public Debt 1/

Percent

*
Estimated foreign holdings as % of private. 2/
Benchmark Revisions

*

*
53%

60%

Foreign holdings growth has stabilized near 53 percent of privately held debt.

50%

50%

Foreign and International Institutional Holdings at FRBNY as % of private. 3/
40% 40%

28% 30% 30%

20%

20%

10%

10%

1/ Privately held debt excludes holdings of the Federal Reserve. 2/ Data through Feb. 28, 2005. See www.treas.gov/tic/indec.html. 3/ Source: Federal Reserve Bank of NY statistical release H4.1.
0% 1993 1994 1995 1996 1997 1998 1999 Calendar Year 2000 2001 . 2002 2003 2004 2005 0%

N O N - R E S ID E N T P A R T IC IP A T IO N IN G - 7 G O V E R N M E N T B O N D M A R K E T S
60% 60%

Canada

UK

F ra n c e

G e rm a n y

Non-resident participation in U. S. Treasury market comparable to some G-7 government debt markets.

Japan
50%

I ta ly

U .S .

53%
50%

40%

40%

30%

30%

20%

20%

10%

10%

0%
20 20 20 19 19 20 20

0%
02 03 00 01 04 98 99

14

S o u r c e s : C a n a d ia n M O F , U K D M O , U .S . T IC , F r e n c h T r e s o r , B u n d e s b a n k , J a p a n e s e M O F w e b s ite s , Ita lia n T r e a s u r y a n d U .S . T r e a s u r y s ta f f c a lc u la tio n s . D a ta f o r th e U K a n d G e r m a n y a r e th r o u g h Q 3 2 0 0 4 .

U.S. Debt Compared to the G7
U.S. Net General Government Debt
G7 less US Median Net General Government Debt G7 less US Average Net General Government Debt

Percentage of GDP 80

75 70 65 60 55 50 45 40

U.S. debt levels compare favorably to other G-7 countries.

Estimated

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). Such data are not always comparable across countries.

35
SOURCE: IMF, WEO April 2005

30 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

P e rc e n ta g e B re a k d o w n o f N o n fin a n c ia l C re d it M a rk e t D e b t
40% 40%

Treasury share of U.S. credit markets remains stable.

35%

35%

30%

30%

25%

25%

20%

20%

15%

15%

10%

10%

5%

5%

S o u rc e : U .S . F e d e ra l R e s e rv e B o a rd o f G o v e rn o rs F lo w o f F u n d s .

15

0% 1995 1996
R e s id e n tia l M o rtg a g e s

0% 1997 1998
O th e r M o rtg a g e s

1999
T re a s u rie s

2000
M u n i's

2001

2002
C o rp o ra te s

2003

2004
O th e r

C o n s u m e r C re d it

Outstanding Short-term Marketable Treasury Securities as a Percentage of Money Market Instruments
75% 75% 70% 65% 60% 55% 50% 45% 40% Short-term Marketable Treasuries = Treasury bills and Treasury coupon securities with 1 year or less remaining to maturity or call. Money Market = Short-term Treasury securities, commercial paper, and open market paper. Sources: U.S. Treasury and U.S. Federal Reserve Board of Governors Flow of Funds statistical release Z.1 35% 30% 25%
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Treasury share of U.S. money markets remains below 20year average.

70% 65% 60% 55% 50% 45% 40% 35% 30% 25%

Calendar Quarters

Net Primary Dealer Positions in Treasuries
6 TIPS
($ billions)

40 Nominal Treasuries ($ billions) 20
nominal zero line

5 4

0 -20 -40

Dealer net short in TIPS near all-time high.

3 2

-60 1 0 -1 -2
TIPS (LHS) TIPS auctions Nominal Treasuries (RHS)
Fe

TIPS Auction Weeks
TIPS zero line

-80 -100 -120 -140 -160

16

-3

Source: NY Fed

5 r- 0 Ap 05 bFe 4 -0 ec D 4 -0 ct O 4 0 gAu 4 0 nJu 4 r- 0 Ap 4 0 bFe 3 -0 ec D 3 -0 ct O 3 0 gAu 3 0 nJu 3 r- 0 Ap 03 bFe 2 -0 ec D 2 -0 ct O 2 0 gAu 2 0 nJu 2 r- 0 Ap 02 bFe 1 -0 ec D 1 -0 ct O 1 0 gAu 1 0 nJu 1 r- 0 Ap 01 b-

Auction Release Time Performance
Current quarter exceptions to Treasury’s 2 minute auction release times
2/7/05 – 13-week Bill: An XML failure resulted in manual typing of results from the PDF version posted on the Bureau of Public Debt's website.

Auction Release Times for May 2004 - April 2005
Data through April 27, 2005
(In Minutes and Seconds)

5:00 4:30 4:00 3:30 3:00 2:30 2:00 1:30 1:00 0:30 0:00
5/3/04 6/2/04 7/6/04 8/3/04 9/7/04 10/5/04 11/8/04

**

5:00 4:30 4:00 3:30 3:00 2:30

* Release time of 28 minutes, 19 seconds * Release time of 28 minutes, 24 seconds

Target release time range

2:00 1:30 1:00 0:30 0:00
12/6/04 1/10/05 2/8/05 3/8/05 04/11/2005

17