MINUTES OF THE MEETING OF THE

TREASURY BORROWING ADVISORY COMMITTEE OF 

THE BOND MARKET ASSOCIATION

January 30, 2001 

The Committee convened at 10:15 a.m. at the Treasury Department for the portion of the meeting that was open 

to the public. All members were present except Mr. Lyski. The Federal Register announcement of the meeting 

and a list of Committee members are attached. 

The Committee was welcomed by the Deputy Assistant Secretary for Federal Finance, Michael Paulus. John 

Auten, Director, Office of Macroeconomic Analysis, summarized the current state of the U.S. economy 

(statement attached). Fred Pietrangeli, Senior Economist for the Office of Market Finance, presented the chart 

show, updating Treasury borrowing estimates and historical debt and interest rate statistics. 

The public meeting ended at 10:40 a.m. 

The Committee reconvened in closed session at the Madison Hotel at 11:20 a.m. All members were present 

except Mr. Lyski. Deputy Assistant Secretary Paulus gave the Committee its Charge, which is also attached. 

The Committee began by discussing the question in the charge regarding other adjustments to Treasury’s future 

borrowing schedule given the continuing projected improvement in the fiscal situation. The Committee felt that 

the elimination of the 52-week bill was preferable to reducing the frequency of 2-year note issuance citing the 

same reasons originally stated by the Committee in the May 4, 1999 Report to the Secretary. First, the 52-week 

bill provided the least utility to the Treasury and to the market, relative to other regular offerings. Second, there 

are substantial secondary market alternatives, in terms of the supply of short coupons to meet investor needs in the 

1-year maturity. Third, the timing of Treasury’s cash flow requirements favor preserving the monthly issuance of 

2-year notes to help meet the pattern of sizeable early month cash drawdowns for regular benefit payments, as 

well as monthly retirements of previously issued 5-year notes. Fourth, the market is expecting the 52-week bill to 

be eliminated. By unanimous consensus the committee agreed that the elimination of the 52-week bill should be 

the next adjustment to the borrowing schedule. 

Next, the Committee considered the large swings in the Treasury cash balances. The idea of possibly issuing a 4­

week bill on a weekly basis was raised by Deputy Assistant Secretary Paulus. The Committee noted that cash 

management bills tend to be an expensive means of financing; a regular 4-week bill issued weekly could serve to 

help mitigate large swings in cash balances so that reliance on large expensive CMB financing could be reduced. 

These bills could be issued weekly along with the regular weekly 13- & 26-week bills and vary in size between $6 

billion to $16 billion. One member felt that there would be little interest in a 4-week bill with an issue size less 

than $6 billion. Another member noted that the 1-month point on the yield curve tends to be very liquid and that 

such an instrument might be well received as long as the issue size meets a minimal liquidity threshold. The 

committee generally felt that the 4-week bill idea had merit and warranted further exploration. 

Following the discussion of short-term financing alternatives, the Chairman raised the topic of longer-term 

financing, particularly 30-year bond issuance. Some members felt that it was illogical to be issuing 30-year debt 

when the latest Administration forecasts indicated that the debt would be paid off in about 10 years. They argued 

that potential costs savings to Treasury from eliminating the 30-year bond would be substantial and that re-entry 

into this market, should Treasury need to, would be fairly easy since markets adapted quickly. Others argued that 

a riskless 30-year benchmark should be maintained because it provided a public utility function in that it increased 

capital markets efficiency; alternatives such as 30-year swaps were much less liquid. Some members remained 

skeptical about the budget and policy outlook and believed that the near-term elimination of the 30-year bond was 
not justified. Others suggested that the 30-year bond should be maintained in order to finance the payment of 

social security benefits at a later date. 

The committee held an informal vote regarding the elimination of the 30-year after the August reopening. The 

informal vote was 11 to 6 with one abstention for elimination of the 30-year after August refunding. The 

Committee refrained from issuing a formal recommendation at this time until the fiscal situation became clearer. 

There was a brief discussion by Committee members regarding changes to handling of FIMA accounts in 

Treasury auctions. The Committee recommended that the Treasury briefly address the pending changes at the 

quarterly press conference to provide clarification to market participants. 

Regarding the composition of the quarterly refunding, by a unanimous vote, the Committee recommended a 

reopening of the 5-3/4 percent 5-year notes of 11/15/05 in an amount of $11 billion and an $11 billion issue of a 

new 10-year note. Finally, the Committee unanimously recommended issuing a new 30-year bond in an amount 

of $10 billion. Looking at the remainder of the January-March quarter, the Committee recommended that 2-year 

notes be increased to $11 billion for February and March, and that weekly bills be reduced from $24 billion level 

to $22 billion level starting in March. 

The Committee’s recommendations for the April-June quarter are in the attached table. 

The meeting adjourned at 12:25 p.m. 

The Committee reconvened at the Madison Hotel at 6:00 p.m. All members were present except Mr. Lyski. The 

Chairman presented the Committee report to Deputy Assistant Secretary Paulus. A brief discussion followed the 

Chairman1s presentation, but did not raise significant questions regarding the report1s content. 

The meeting adjourned at 6:15 p.m. 

Paul F, Malvey, Director 

Office of Market Finance 

January 30, 2001 

Attachments 

Certified by: 

James R. Capra, Chairman

Treasury Borrowing Advisory Committee 

of The Bond Market Association 

Last Updated January 30, 2001
January 30, 2001 

COMMITTEE CHARGE

The Treasury would like the Committee’s specific advice on the following: 

Treasury financing 

• The Administration’s FY 2002 Economic Outlook, released on January 16, projects a surplus of 

$256 billion for FY 2001, compared to the Midsession review estimate of $228 billion. Many 

private sector estimates are even higher. Given the fiscal forecasts, Treasury needs to make 

additional adjustments to its financing plans this year. In the past, the Committee has 

recommended that the next adjustment to its borrowing schedule should be either the elimination 

of the 52-week bill or a reduction in the frequency of 2-year notes. What would you recommend 

as the next adjustment to Treasury’s financing calendar? 

• In the process of paying down the marketable debt held by the public, the Treasury has sought to 

distribute the reduction in borrowing across various maturities in an effort to maintain large, 

liquid benchmark issues. In the process, the Treasury has reduced the member of coupon security 

auctions from 39 to 25 per year, and it has reduced the number of 52-week bill auctions from 13 

to 4. The reduced number of financing opportunities, and larger swings in net revenues, has 

contributed to an increase in the magnitudes of the variations in Treasury’s cash balances. What 

actions, if any, would the Committee recommend to help dampen the swings in Treasury cash 

balances? 

• The composition of a financing to refund approximately $25.1 billion of privately held notes 

maturing on February 15 and to raise approximately $5-7 billion in cash in 5-year and 10-year 

notes and 30-year bonds. 

• The composition of Treasury financing for the remainder of the January-March quarter and for 

the April-June quarter. 
Federal Register / Vol. 66, No. 7 / Wednesday, January 10, 2001 / Notices 

DEPARTMENT OF THE TREASURY

DEBT MANAGEMENT ADVISORY

COMMITTEE MEETING

Notice is hereby given, pursuant to 5 U.S.C. App. §10(a)(2), that a meeting will be held at the U.S. Treasury 

Department, 15th and Pennsylvania Avenue, N.W., Washington, D.C., on January 30, 2001, of the following debt 

management advisory committee: 

The Bond Market Trade Association 

Treasury Borrowing Advisory Committee 

The agenda for the meeting provides for a technical background briefing by Treasury staff, followed by a charge 

by the Secretary of the Treasury or his designate that the committee discuss particular issues, and a working 

session. Following the working session, the committee will present a written report of its recommendations. 

The background briefing by Treasury staff will be held at 9:00 a.m. Eastern time and will be open to the public. 

The remaining sessions and the committee's reporting session will be closed to the public, pursuant to 5 U.S.C. 

App. §10(d). 

This notice shall constitute my determination, pursuant to the authority placed in heads of departments by 5 

U.S.C. App. §10(d) and vested in me by Treasury Department Order No. 101-05, that the closed portions of the 

meeting are concerned with information that is exempt from disclosure under 5 U.S.C. §552b(c)(9)(A). The 

public interest requires that such meetings be closed to the public because the Treasury Department requires frank 

and full advice from representatives of the financial community prior to making its final decision on major 

financing operations. Historically, this advice has been offered by debt management advisory committees 

established by the several major segments of the financial community. When so utilized, such a committee is 

recognized to be an advisory committee under 5 U.S.C. App. §3. 

Although the Treasury’s final announcement of financing plans may not reflect the recommendations provided in 

reports of the advisory committee, premature disclosure of the committee’s deliberations and reports would be 

likely to lead to significant financial speculation in the securities market. Thus, these meetings fall within the 

exemption covered by 5 U.S.C. §552b(c)(9)(A). 

The Office of Financial Markets is responsible for maintaining records of debt management advisory committee 

meetings and for providing annual reports setting forth a summary of committee activities and such other matters 

as may be informative to the public consistent with the policy of 5 U.S.C. §552b. 

Lee Sachs 

Assistant Secretary 

(Financial Markets) 

Dated: January 30, 2001 
Treasury Borrowing Advisory Committee 

of the Public Securities Association 

Chairman 

James R. Capra 

President

Capra Asset Management, Inc.

555 Theodore Fremd Avenue, Suite C-204

Rye, NY 10580 

Vice Chairman 

Timothy W. Jay 

Managing Director

Lehman Government Securities, Inc. 

200 Vesey Street, 9th Floor 

New York, NY 10285 

Stanley F. Druckenmiller

Chariman and Chief Executive Officer

Duquesne Capital Management LLC

900 Third Avenue, 29th Floor 

New York, NY 10166

Stephen C. Francis

Vice Chairman

Fischer, Francis, Trees & Watts, Inc.

200 Park Avenue

New York, NY 10166

Daniel S. Ahearn

President

Capital Markets Strategies Co.

50 Congress Street, Suite 816

Boston, MA 02109

Keith T. Anderson 

Chief Investment Officer, 

Fixed Income BlackRock 

345 Park Avenue 

New York, NY 10154 

Richard A. Axilrod

Managing Director

G. Kelly Martin

Senior Vice President

Head of Global Debr Markets

Merrill Lynch

4 World Financial Center, 7th Floor

New York, NY 10080

Thomas G. Ma 

FID Salomon Smith Barney 

390 Greenwich Street, 4th Street

New York, NY 10013 

Joseph Rosenberg

Senior Investment Strategist

Loews Corp.

667 Madison Avenue

New York, NY 10021-8087

Morgan Stark

Principal

Ramius Capital Group

Chrysler Center

666 Third Avenue, 26th Floor

New York, NY 10017

Mark B. Werner

Managing Director

JP Morgan Securities, Inc.

60 Wall Street

New York, NY 10260

Charles D. White

Managing Director

Wells Fargo

Mail Station S4753-040

3300 West Sahara Avenue

Las Vegas, NV 89102

Lisa W. Hess

Managing Director

Zesiger Capital Group LLC

320 Park Avenue

New York, NY 10022

Thomas L. Kalaris 

President Barclays Capital Inc.

222 Broadway 

New York, NY 10038

James Marks Keller

Executive Vice President/Portfolio 

Manager

Pacific Investment Management 

Company

Moore Capital Management, Inc. 

1251 Avenue of the Americas, 53rd Fl 

New York, NY 10020

Ian Godwin Banwell 

Co-Chief Investment Officer 

Bank of America 

100 N. Tryon St, NCI-007-06-06 

Charlotte, NC 2855-001 

Edward J. Breslin

Managing Director

Chase Securities, Inc.

270 park Avenue, 8th Floor

New York, NY 10017

Richard S. Davis

Senior Vice President -

Head of Fixed Income Investments

Metlife Investments

334 Madison Avenue, PO Box 633

Convent Station, NJ 07961-0633

840 Newport Center Drive, Suite 300

Newport Beach, CA 92660 

Wayne D. Lyski

Chairman & Chief Investment Officer

Alliance Fixed Income Investors

Alliance Capital

Management Corporation

1345 Avenue of the Americas

New York, NY 10105