FROM THE OFFICE OF PUBLIC AFFAIRSRR-2197
Good morning. I will begin with today's refunding announcement and the terms of the regular Treasury February 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 April - June 1998 quarter. I will then discuss certain other debt management issues.
We are offering $35.0 billion of notes and bonds to refund $26.0 billion of privately held notes maturing on February 15 and to raise approximately $9.0 billion of cash.
The three securities are: First, a 3-year note in the amount of $13.0 billion, maturing on February 15, 2001. This note is scheduled to be auctioned on a yield basis at 1:00 p.m. Eastern time on Tuesday, February 10.
Second, a 10-year note in the amount of $12.0 billion. This note is scheduled to be auctioned on a yield basis at 1:00 p.m. Eastern time on Wednesday, February 11.
Third, a 29-3/4 year bond in the amount of $10.0 billion, a reopening of the 6-1/8% bond 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, February 12.
The total of these issues is the same as the total amount offered in the November 1997 quarterly refunding.
As announced on Monday, February 2, we estimate a net market borrowing need of $10 billion for the January - March quarter. The estimate assumes a $20 billion cash balance at the end of March. Including the securities announced in this refunding, we have paid down $24.3 billion of cash from sales of marketable securities. See the attachment for details.
The Treasury will need to borrow $34.3 billion in marketable securities during the rest of the January - March quarter. This can be accomplished with the regular sales of 13-, 26-, and 52-week bills in February and March and 2- and 5-year notes in February and March and with cash management bills that will be issued later in February and in early March to mature after the April 15 tax date. Further short-term cash management bills may be needed to cover any remaining low point in the cash balance in March. The tentative auction calendars for February, March, and April are included in the chart package that was distributed today.
We estimate that the Treasury will pay down between $75 billion and $80 billion in marketable securities during the April - June quarter, assuming a $35 billion cash balance on June 30.
Last month, we held our fifth auction of inflation-indexed securities: a new 10-year indexed note. We were pleased with this auction, and we continue to be pleased with the development of the inflation-indexed market. The development of the inflation-indexed market is a long-term process, and we have made a long-term commitment to its continuing development. The next step in that process is expanding the indexed market to include 30-year indexed bonds. As has been recommended by the Treasury Borrowing Advisory Committee, we are planning to sell a 30-year indexed bond in April 1998.
Inflation-indexed securities have been strippable since the Treasury began selling them last year, but interest STRIPS from different inflation-indexed issues are not yet interchangeable for reconstitution purposes.
As a promised improvement to the IIS, we published a proposed amendment to the uniform offering circular for Treasury securities in the Federal Register on December 8, 1997. The proposal would permit interchangeability (aka fungibility) of the interest components of stripped inflation-indexed securities that have the same payment dates. The comment period for the proposal closes on February 6, and we expect a final amendment to be published soon thereafter.
In the January 29 Federal Register, we published a change in the Uniform Offering Circular for Treasury securities that tightened the restrictions on noncompetitive bidding in Treasury auctions, effective immediately. Under the amendment, a noncompetitive bidder may not hold, at any time, a position for its own account in when-issued trading or in futures or forward contracts in the security being auctioned or enter into any agreement to purchase or sell or otherwise dispose of securities between the date of the offering announcement and the time of the official announcement by the Treasury of the auction results. This is a change in timing only. Before the change, the prohibition had lasted from the time of the offering announcement until the deadline for competitive tenders. We have simply extended the end of the prohibition from the competitive tender deadline until the announcement of the auction results. This change was directed at limiting the noncompetitive bidding option to small, less sophisticated bidders.
The May quarterly refunding press conference is scheduled to be held on Wednesday, May 6, 1998.
Including the securities announced in this refunding, we have paid down $24.3 billion of cash from sales of marketable securities.
This has been accomplished as follows: raised $8.4 billion from the 10-year inflation-indexed notes issued January 15; paid down $9.1 billion in the 7-year notes that matured January 15; paid down $1.6 billion in the 2-year notes that were issued February 2; raised $0.7 billion in the 5-year notes that were issued February 2; paid down $5.9 billion in the regular weekly bills including those announced yesterday; paid down $4.6 billion in the 52-week bills which were issued January 8 and will be issued tomorrow, February 5; paid down $21.1 billion of cash management bills that matured on January 22; and raised $9.0 billion with the notes and bonds we are announcing today.