Press Releases

Assistant Secretary for Financial Markets Brian C. Roseboro May 2002 Quarterly Refunding Statement

(Archived Content)



The Department of the Treasury announced its quarterly refunding needs and related financing changes today. In determining these financing needs and considering changes to improve the financing process, we strive to obtain the lowest cost of financing over time for the American taxpayer. We believe the best way to meet this objective is to issue debt in a regular and predictable pattern, provide transparency in our decision-making process, and seek continuous improvements in the auction process. The decisions announced today reflect our efforts to meet this objective.

We are offering $33 billion of notes to refund approximately $9 billion of privately held bonds maturing on May 15, raising approximately $24 billion. The securities are:

  1. A new 5-year note in the amount of $22 billion, maturing May 15, 2007.
  2. A re-opening of the 10-year note first issued in February 2002, in the amount of $11 billion, maturing February 15, 2012.

These securities will be auctioned on a yield basis at 1:00 p.m. Eastern time on Tuesday, May 7, and Wednesday, May 8, respectively. The balance of our financing requirements will be met through 10-year IIS, 2-year note and bill offerings.

Bill Issuance

Over the last quarter, inaction on the debt ceiling led us to scale back issuance of 4-week bills. As a result, we issued larger and more frequent cash management bills than we would have otherwise. In the coming quarter, we may need to issue an off-cycle cash management bill due to a combination of seasonal cash swings in early June and concerns over the debt limit.

Re-opening Policy

Beginning with the new 5-year note announced today, we are discontinuing our regular re-opening policy for this security. Going forward, our policy will be to auction a new 5-year note each quarter unless financing needs or market conditions require a re-opening.

This policy will have the benefit of smoothing the maturity distribution of our issuance and will allow for slightly larger issuance sizes. We expect this policy to enhance secondary market liquidity for Treasury securities.

At this time, we are making no changes to the current policy of regular re-openings for 10-year notes.

Buyback Operations

We will not be conducting buybacks this quarter due to lower-than-expected tax receipts.

Inflation-Indexed Securities

In our last quarterly refunding announcement, we solicited comments from the public on enhancing the attractiveness of the Treasury inflation-indexed security (TIIS) market. The comments that we received have been valuable and largely supportive of the current structure of the program. Today, we announce the following changes to the program:

  • Beginning in July, we will reduce the when-issued (WI) period for TIIS auctions. The 10-year TIIS note will be announced on July 8, be auctioned on July 10 and settle on July 15.
  • The 10-year TIIS to be auctioned in July will be re-opened twice after the initial auction, in October and January.
  • We will continue to seek ways to promote investor interest in the inflation-indexed market. As the world's largest issuer of inflation-indexed securities, we will encourage the inclusion of TIIS in investor portfolios and bond fund indices. We will also encourage academics and financial analysts to continue their research into the TIIS market.

Policy Issues Under Discussion

We are exploring ways to reduce the costs associated with short-term fluctuations in cash balances. Treasury has already undertaken a trial of a Term Investment Option for cash balances held in Treasury's Tax and Loan accounts. Other possible changes include the use of term repurchase agreements and the outright purchase of short-dated bills and coupons. Either change would have no long-term effect on debt outstanding, but would improve management of cash balances and would be consistent with our objective of minimizing borrowing costs over time. Comments on these or other ways of reducing the cost of cash balances are welcome.

We have released an Advance Notice of Proposed Rulemaking (ANPR) on application of the 35 percent rule and Net Long Position (NLP) calculations (see In the formal comment period, we seek suggestions on alternatives that would meet the twin goals of making auctions more operationally efficient and safeguarding the objective of the NLP rule.

We also seek comments on changes to the regular re-opening policy for 10-year notes.

Comments and suggestions on these subjects or others relating to debt management can be sent to

Auction Performance Reporting and New Target

To track our progress in shortening auction times, we released auction performance statistics for the first time as part of the chart package released Monday, April 29, 2002. We intend to expand the auction performance reporting as part of each quarterly refunding.

We are also moving our target for auction release times from six minutes to five minutes, effective May 7. We will continue to identify and explain deviations of more than +/- 60 seconds.