FROM THE OFFICE OF PUBLIC AFFAIRSRR-2031
DEPUTY ASSISTANT SECRETARY FOR FEDERAL FINANCE
NOVEMBER 1997 TREASURY QUARTERLY REFUNDING
Good morning. I will begin with today's refunding announcement and the terms of the regular Treasury November quarterly refunding. I will also discuss Treasury market borrowing requirements for the balance of the current calendar quarter and our estimated cash needs for the January-March 1998 quarter. I will then discuss certain other debt management issues.
1. We are offering $35.0 billion of notes and bonds to refund $26.5 billion of privately held notes maturing on November 15 and to raise approximately $8.5 billion of cash.
The three securities are:
-- First, a 3-year note in the amount of $14.0 billion, maturing on November 15, 2000. This note is scheduled to be auctioned on a yield basis at 1:00 p.m. Eastern time on Tuesday, November 4.
-- Second, a 9-3/4 year note, which is a reopening of the
6-1/8% note of August 15, 2007, in the amount of $11.0 billion. This note is scheduled to be auctioned on a yield basis at 1:00 p.m. Eastern time on Wednesday, November 5.
-- Third, a 30-year bond in the amount of $10.0 billion, maturing on November 15, 2027. This bond is scheduled to be auctioned on a yield basis at 1:00 p.m. Eastern time on Thursday, November 6.
This is the smallest quarterly refunding in which three coupon securities have been sold since May 1993, when the Treasury auctioned $35 billion of notes and bonds.
2. As announced on Monday, October 27, we estimate a net market borrowing need of $20 billion for the October-December quarter. The estimate assumes a $35 billion cash balance at the end of December. Including the securities announced in this refunding, we have raised $27.2 billion of cash from sales of marketable securities. See the attachment for details.
3. The Treasury will need to pay down $7.2 billion in market borrowing during the rest of the October-December quarter. This can be accomplished during the regular sales of 13-, 26-, and 52-week bills in November and December and 2- and 5-year notes in November and December. A cash management bill will be needed to cover the low point in the cash balance in early December. The tentative auction calendars for November, December, and January are included in the chart package that was distributed today.
4. We estimate Treasury net market borrowing to be in a range of $15 billion to $20 billion for the January-March quarter, assuming a $20 billion cash balance on March 31.
5. Earlier this month, we held our fourth auction of inflation-indexed securities. It was a reopening of the 5-year indexed notes auctioned in July. We were pleased with this most recent auction. The development of the inflation-indexed market is a long-term process, and we have made a long-term commitment to this market. We intend to sell a 10-year indexed note in January 1998. The Treasury Borrowing Advisory Committee recommended that we sell a 30-year indexed bond in April 1998. We will evaluate the Committee’s recommendation, and we hope to announce the timing of the first issue of 30-year inflation-indexed bonds soon.
6. Inflation-indexed securities have been strippable since the Treasury began selling them early this year. As an improvement in the IIS, we are working on a proposal to permit interchangeability (aka fungibility) of the interest components of stripped inflation-indexed securities that have the same payment dates. We anticipate having the proposal ready for publication in the Federal Register in November.
7. In the August 12 Federal Register, we published a change in the Uniform Offering Circular for Treasury securities that will reduce the net long position reporting threshold amount for all Treasury bill auctions (including cash management bills) from $2 billion to $1 billion, effective November 10, 1997. This change recognizes reduced bill auction sizes, particularly seasonally lower amounts of the bills in the first half of a calendar year. We will implement this change in the regular weekly auction of Treasury bills that is scheduled for
8. The August 12 Federal Register also contained final rules on half-decimal bidding in regular bill auctions. Tests on our computer systems are now complete, and we will also implement this change in the regular weekly Treasury bill auction that is scheduled for November 10.
9. In its report to the Treasury in July, the Borrowing Advisory Committee suggested that Treasury make all fixed-rate notes eligible for stripping in order to increase flexibility in the STRIPS market. The Treasury believed that this flexibility could be reflected in lower Treasury borrowing costs. Therefore, beginning with the 2- and 5-year notes that were issued on September 30, 1997, all new fixed-rate Treasury notes became eligible for stripping.
10. Richard M. Kelly is retiring from the Treasury Borrowing Advisory Committee following the meeting that was held earlier this morning. In a letter, Secretary Rubin expressed his appreciation for Mr. Kelly’s service as a member and Chairman of the Committee. Mr. Kelly was recognized for his contributions to the development of Treasury debt management policies.
11. The February quarterly refunding press conference is scheduled to be held on Wednesday, February 4, 1998.
Including the securities announced in this refunding, we have raised $27.2 billion of cash from sales of marketable securities.
This has been accomplished as follows:
-- raised $8.4 billion from the 5-year inflation-indexed notes issued October 15;
-- paid down $8.9 billion in the 7-year notes that matured October 15;
-- paid down $2.0 billion in the 2-year notes to be issued October 31;
-- paid down $0.1 billion in the 5-year notes to be issued October 31;
-- raised $1.6 billion in the regular weekly bills including those announced yesterday;
-- paid down $1.4 billion in the 52-week bills which were issued October 16;
-- raised $21.0 billion in the cash management bills announced yesterday, and
-- raised $8.5 billion with the notes and bonds announced today.