Fixed Income Chart Of The Day: Investing the TGA as a loss leader

Research evidence excerpt

Fixed Income Chart Of The Day: Investing the TGA as a loss leader

Deutsche Bank

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Fixed Income Chart Of The Day 12 May 2026

Investing the TGA as a loss leader

Andrew Fu

In our note earlier this week regarding the TBAC charge on Treasury investment Strategist

into repo, we highlighted several potential benefits of such a policy. While the +1-212-250-1743

TBAC focused on the economic value that Treasury could obtain through

investing at repo rates above IORB, we argue that if Treasury wants to tap into Matthew Raskin

Strategist the non-economic benefits, shift responsibility away from the Fed toward +1-212-250-1741

Treasury, and have a more consistent market presence as opposed to only

coming in more episodically, there may be economic justifications for investing in Steven Zeng, CFA

repo even when repo rates are below IORB. Strategist

+1-212-250-9373

Beyond the headline economics of a repo-IORB spread, the policy shift could

reduce Treasury’s debt issuance costs as it promotes wider swap spreads Francis Yared

Strategist

through reduced funding costs for investors. We estimate this impact using a +44-20-754-54017

simple regression model of weekly differences of 10y swap spreads on 3m

SOFR/FF spreads, with bond volatility (MOVE index) and the level of yields (10y Ioannis Sokos

yields) as control variables, we find that a 1bp reduction in SOFR relative to fed Strategist

+44-20-754-75680 funds corresponds to a roughly 0.7bp decrease in swap spreads. Using current

coupon sizes and factoring in the monthly auction schedule, we estimate that a Markus Heider

reduction in funding costs by 2bp could reduce Treasury’s funding costs by $300 Macro Strategist

million. While this may be slightly overestimating the impact given that the Fed +44-20-754-52167