(Archived Content)
The Department of Treasury announced today that effective August 27, 2001 it will no longer incorporate the prevailing market bond equivalent yield for the most-recently auctioned 52-week bill in estimating the yield curve for Treasury securities. This change will result in a more accurate estimate of Treasury's current cost of borrowing in the 1-year maturity range.
As announced on January 31, 2001, the Treasury will cease offering 52-week Treasury bills after the February 27, 2001 auction (issue date March 1, 2001). Historically, the Treasury has used the daily closing market bond equivalent yield on the most recently issued 52-week bill as an input in estimating the 1-year Constant Maturity Treasury (CMT) yield on Treasury's daily yield curve. Treasury will continue to use the March 1 dated 52-week bill as an input for the daily yield curve through the close of business on Friday, August 24, the last business day before the auction of a new 26-week bill. On Monday, August 27, Treasury will auction a new 26-week bill (a standard reopening of the 52-week bill CUSIP), and the use of a 52-week bill as a yield curve input will be discontinued. This transitional process is designed to avoid any potential effects of abruptly discontinuing the use of the 52-week Treasury bill in the estimation of Treasury's yield curve. Thereafter, the Treasury will estimate the 1-year CMT yield by using a nonlinear interpolation between the yields for the on-the-run 6-month bill and 2-year note.
The Treasury yield curve is a line graph constructed daily that estimates the interest rates at which Treasury could borrow at any maturity from 3-months to 30-years under market conditions prevailing as of the close of business. The Treasury estimates the yield curve using a cubic spline model. The model inputs are primarily bid-side yields for the most recently issued Treasury securities in each maturity class for which Treasury currently conducts auctions.
The Treasury will continue to provide 1-year CMT yields to the Federal Reserve Board for publication in their Statistical Releases H.15, G.13 and other publications along with yields for 3- and 6-month, and 2-, 3-, 5-, 7-, 10-, 20-, and 30-year maturities. Treasury will also make these CMT yields available through the Commerce Department's Economic Bulletin Board and the Treasury Department's Debt Management web page site at http://www.treasury.gov/about/organizational-structure/offices/Pages/-Debt-Management.aspx.