The Department of the Treasury announced its quarterly refunding needs and related financing changes today. There will be no change in the issuance calendar this quarter.
For this quarterly refunding, we are offering $42 billion of notes to refund approximately $21.6 billion of privately held notes and bonds maturing on February 15, raising approximately $20.4 billion. The securities are:
1. A new 5-year note in the amount of $24 billion, maturing February 15, 2008.
2. A new 10-year note in the amount of $18 billion, maturing February 15, 2013.
These securities will be auctioned on a yield basis at 1:00 p.m. Eastern time on Tuesday, February 11, and Wednesday, February 12, respectively. The balance of our financing requirements will be met through 2-year note and bill offerings.
Treasury may issue off-cycle cash management bills due to seasonal cash swings in early March. If permitted under the debt ceiling, Treasury will issue cash management bills in early April.
After this quarterly refunding, we plan to:
• Reintroduce a 3-year note at the May refunding, to be part of future quarterly financing packages, with the first auction on May 6, 2003; and
• Institute a regular reopening policy for 5-year notes, beginning with the May 15, 2008 issue. The reopening will occur one month after the initial auction (two months before the next auction for a new note).
The primary purpose of introducing the 3-year note is to diversify issuance. Issuance of the 3-year note will diminish somewhat Treasury’s borrowing in 2-year notes and bills, while also providing additional capacity for fresh borrowing.
Lowest Cost Financing Over Time
We are examining ways to measure the Treasury’s performance against our goal of lowest cost funding over time. In particular we are examining our issuance patterns, the structure of our maturing debt, and the efficiency of our auctions. We welcome the thoughts of interested parties. We have sought the advice of the Treasury Borrowing Advisory Committee on these issues. The minutes of the Committee’s most recent meeting are available on our website (see address below).
Prior to each quarterly refunding, Treasury seeks the individual advice of some of the Federal Reserve Bank of New York’s primary dealers. As announced last quarter, we are now posting the questions we sent to primary dealers on our website:
Other market participants and observers are invited to respond to these questions via email at the address below.
Treasury will not be conducting buybacks this quarter.
Policy Issues Under Discussion
Treasury continues to review how offerings would be adjusted in the event that additional borrowing capacity is needed. Consideration will focus on whether the next step would be to reopen 10-year notes or, alternatively, to auction 5-year notes monthly. We are studying the costs and benefits of these options. We will not reopen the February and May 10-year notes.
As part of our promotion of inflation-indexed securities, we are re-examining the current auction cycle. We anticipate expanding inflation-indexed issuance in the coming quarters.
Also, we continue to explore ways to reduce the costs associated with short-term fluctuations in cash balances.
Please send comments and suggestions on these subjects or others relating to debt management to email@example.com.