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By Stephanie Tupper, Investment Management Division

The Investment Management Division (IMD) of Federal Finance was created in 2003 to assist the Office of the Fiscal Assistant Secretary (OFAS) with implementing Treasury’s strategic investment objectives. The principal function of IMD has evolved to implement flawless performance of Treasury’s daily investment operations. The invested funds are in excess of the Treasury General Account’s target balance of $5 billion. Treasury has two primary investment tools that IMD oversees: The Term Investment Option (TIO) program and the Reverse Repurchase (Repo) program. In FY 2007, 77% of net investable funds were invested through the TIO or Repo programs.

The TIO program is an investment opportunity offered to Treasury Tax and Loan (TT&L) financial institutions. TIO became a permanent investment tool for Treasury in 2003. TIO is a single-rate auction, for which participants may submit an offer amount and a bid rate. The auction is for a fixed term and the investment rate is determined through a competitive bidding process. Traditionally, IMD’s offering has been a fixed amount. However, IMD introduced a variation to the auction process in September 2007, using an auction range (an announced lower and upper limit) as an alternative to using a fixed dollar amount. By using an auction range in lieu of a fixed offering amount, OFAS is able to select an investment rate that will maximize Treasury’s earnings. In FY 2007, IMD performed 111 TIO auctions and invested $603 billion. Approximately 60 financial institutions are currently enrolled in the program. Up-to-date TIO information can be found on the FMS website.

The Repo program is Treasury's newest investment opportunity offered to TT&L financial institutions. The Repo program began as a pilot in March 2006 and was designated a permanent program in the fall of 2007. A Repo transaction is the purchase of securities (U.S. Treasury-issued Bills, Notes and Bonds) with the agreement to sell them at an agreed-upon price at a specified future date. For Treasury’s counterparty, who is selling the security and agreeing to repurchase it in the future, it is a Repo. For Treasury, who is buying the security and agreeing to sell in the future, it is a reverse repurchase agreement. Treasury currently has three counterparties. Every morning, IMD will contact Treasury’s Repo counterparties to request a bid rate for the investment amount. The funds are awarded to the counterparty who bids the highest rate. In FY 2007, IMD performed 216 Repo transactions and invested $559 billion.

While IMD’s most notable tasks are Treasury’s investment operations, IMD also performs several other functions. For example, IMD oversees the Treasury Investment Program (TIP) system, which is used to directly invest excess Treasury funds with participating financial institutions that are charged interest for use of the funds. IMD also manages the Treasury Tax & Loan (TT&L) Plus™ application, which provides a web interface for authorized financial institutions and Federal Program Agencies (FPAs) to access the TT&L program and other Treasury Collateral programs. TT&L Plus is the front-end interface to two centralized applications, the TIP System and the Paper Tax System (PATAX).

Additionally, IMD provides project management support to OFAS for the Fiscal Projections Systems (FPS). OFAS uses FPS to produce daily forecasts of cash and debt balances (generally for periods of six to nine months) as well as to manage the Government's daily cash position and short-term investment portfolio.

Looking forward, IMD has been tasked with two critical Collections and Cash Management Modernization (CCMM) initiatives: Implementation of the new Investment System and the new Forecasting System. Both of these efforts will require extensive collaboration and partnership with GWA (Governmentwide Accounting), OFAS and the Federal Reserve. IMD is also involved in the Elimination of Retainer Processing effort as well as the new Collateral Management System.

For additional information about IMD’s investment programs, please contact Renee Clyburn, Project Manager, at (202) 874-2422.

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