Treasury Investment Program

Overview

Treasury's operating cash balance is maintained in a portfolio of four separate investment vehicles under investment authority codified at Title 31 U.S.C. Section 323. Currently, only financial institutions that are designated as Treasury Tax and Loan (TT&L) depositaries are eligible to participate in Treasury's investment program.

Treasury's Federal Reserve Account:
Represents Treasury's checking account. The vast majority of payments and collections are paid out of and received into this account maintained at the Federal Reserve Bank of New York. Treasury does not earn explicit interest earnings on the account although it does receive implicit interest on the balances in the form of Federal Reserve earnings. Treasury generally targets a $5 billion end-of-day balance in its Federal Reserve Account.

TT&L Balances:
Represents funds invested with commercial depositaries that agree to pay Treasury interest at the rate determined by the Secretary of the Treasury. Treasury has the ability to call TT&L funds on a same-day basis and place funds on a same-day or one-day basis depending upon each depositary's designation (almost 90% of Treasury's TT&L capacity is available on a same-day basis). TT&L investments may be placed as direct investments, dynamic investments, or special direct investments.

Term Investment Option (TIO) Investments:
The TIO is an investment opportunity offered to TT&L depositaries. Treasury will frequently auction excess operating funds to participants for a fixed term and rate determined through a competitive bidding process. Term Investments are normally placed toward mid-month and mature toward end-of-month. Acceptable collateral is typically TT&L collateral and commercial loans held in a Borrower-in-Custody (BIC) arrangement. However, Treasury reserves the right to restrict acceptable collateral to TT&L collateral only.

Repurchase Agreement (Repo) Program:
The Repo Program is Treasury's newest investment opportunity offered to TT&L depositaries. Treasury will invest excess operating funds through Reverse Repo transactions for an overnight term. Repo investments will typically occur daily at approximately 9:15 a.m. ET. Settlement is Fedwire delivery-versus-payment. Underlying securities for a Repo investment must be U.S. Treasury Bills, Notes, or Bonds. The Repo Program began as a pilot program in March 2006 and was designated a permanent program in the fall of 2007.