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The Treasury will make three changes to its auction schedule in the coming months.   In August, we will begin to auction 5-year notes on a mid-monthly basis.   We will also reopen 10-year notes on an intra-quarterly basis.   While these changes have been made in response to larger financing needs, they will benefit Treasury by creating additional flexibility in meeting unexpected swings in borrowing needs.   Additionally, we will add a fourth auction to the 10-year inflation-indexed cycle.  

For this quarterly refunding, we are offering $58 billion of notes to refund approximately $2.3 billion of privately held notes and bonds maturing on May 15, raising approximately $55.7 billion.   The securities are:

1. A new 3-year note in the amount of $22 billion, maturing May 15, 2006.

    

2.  A new 5-year note in the amount of $18 billion, maturing May 15, 2008.

    

3.  A new 10-year note in the amount of $18 billion, maturing May 15, 2013.

    

These securities will be auctioned on a yield basis at 1:00 p.m. Eastern time on Tuesday, May 6; Wednesday, May 7; and Thursday, May 8, respectively.   The balance of our financing requirements will be met through the 5-year note reopening, as well as 2-year note and bill offerings.   The Treasury is likely to issue off-cycle cash management bills in early May and June.  

New Issuance

Beginning in August, Treasury will issue 5-year notes on the 15 ^th of each month.   Treasury will also regularly reopen 10-year notes on the 15 ^th  in the month following the traditional refunding. This additional issuance will help Treasury maintain its flexibility in responding to unexpected changes in financing requirements.   

Expansion of Inflation-Indexed Securities Calendar

We are expanding the TIIS calendar to four auctions a year.   New 10-year inflation-indexed notes will be auctioned in January and July and reopened three months later, in April and October, respectively.   The market for TIIS is showing encouraging signs of growth: trading volumes are up and lower dealer inventories suggest an increase in investor demand.   Increased inflation-indexed issuance is in response to increased demand for these securities and underlines Treasurys commitment to the market.  

New Addendum to Auction Releases

As part of our efforts to improve the transparency and performance of our auctions, we will begin providing an addendum to our normal auction results press release.   This addendum, to be released approximately twenty minutes after each auction, will breakdown competitive tenders and awards by a) primary dealers, b) other direct bidders, and c) indirect bidders.   The primary dealer category will include bids submitted by primary dealers for their house accounts.   The direct bidder group will consist of bids by non-primary dealers submitted for their own accounts.   The indirect bidder category will comprise all bids placed by customers through a submitter, including foreign and international monetary accounts placing bids through the Federal Reserve Bank of New York.

Policy Issues Under Discussion

Following September 11, the Treasury postponed and then cancelled a 4-week bill auction.   This experience has led us to begin developing more precise contingency plans for auction disruptions.   In our most recent dealer meetings, we discussed the need for defining our likely responses to disruption scenarios and what those responses should be.   We will continue to consult with market participants to determine what actions, either now or following a disruption, the Treasury could take to reduce uncertainty around auction disruptions.

Please send comments and suggestions on these subjects or others to debt.management@treasury.gov.