U.S. Treasury short-term investment strategies and programs

¶ … Investment Practices and Strategies in the U.S. Treasury

Treasury Tax & Loan (TT&L) notes

This program was established in 1978 to provide Treasury with an effective tax collection mechanism designed to assist in balancing the Treasury General Account (TGA). Through this program the Treasury collaborates with over 9000 commercial financial organizations whose mandate is tax payment collection. Almost ten percent of these institutions also hold funds and pay interest to Treasury. The program is divided into three sections collectors, retainers, and investors. The collectors, which make the majority receive payments from customers and remit the funds to Treasury's account. Retainers unlike the collectors retain specific amount subject to interest and the funds can be called by the Treasury. The investors, collect, retain and receive funds from the treasury through investment channels (United States Government Accountability Office, 2007).

One major advantage of this program is the ability to provide the Treasury with an effective federal tax payment collecting mechanism. It also helps Treasury achieve the target balance in the Treasury General Account. However, the program has some drawbacks, and one major one is that it subjects treasury to concentrating risks (State of Washington Office of Financial Management, 2010). It also possesses challenges with capacity, for example, in 2006 a third of Treasury operating funds were invested in this program's deposits with a proximately 8 billion daily average.

Recommended Treasury's Short-Term Investment Policy

The primary investment goal the Short-Term investment is to provide liquidity and operating funds for present and future needs of Treasury. It is essential that the funds be invested in a highly secured portfolio which is less risky and provides a favorable return in relationship to any foreseeable economic and market conditions.

Return

State of Washington Office of Financial Management . (2010). Risk Management Basics . Olympia: State of Washington Office of Financial Management .

United States Government Accountability Office. (2007). Debt Management. United States Government Accountability Office.