REPORT TO THE SECRETARY OF THE TREASURY 

FROM THE U.S. GOVERNMENT AND FEDERAL 

AGGNCTES SECURITIES COMMITTEE OF THE 

PUBLIC SECURITIES ASSOCIATION 

January 29, 1986 

Dear Mr. Secretary: 

Since the Committee last met in Washington in July, 

interest rates have declined across a11 maturities. The 

most significant reductions have occurred among the longest 

maturities where rates have fallen by about 1-l/2 percentage 

points. Short-term rates have declined in this period by 

nearly 50 basis points and intermediate-term rates are more 

than 1 percentage point lower. On balance, the yield curve 

has substantially flattened. 

Several developments, both technical and fundamental, 

have been responsible f~r this decline. Concerns about the 

implications of rapid money supply growth in the first half 

of 1985 were allayed somewhat as the economy grew at a very 

moderate pace oger the summer and fall months, 

Whereas investors had grown pessimistic about the chances 

for meaningful deficit reduction following the breakdown of 

budget negotiations, the passage of the Gramm-Rudman-Hollings 

pian has reinvigorated hopes for redressing the serious Fiscal 

imbn lance 

Despite an acceleration in inflation in the fourth quarter 

of 1985 due mostly to higher food and energy costs, prices in 

both areas were expected to recede, In particular, investors 

have heen encouraged by the prospect of lower oil prices and 

the ameliorating effects that could have on economic growth 

without stirring inflation. 

The agreement in late September by the G-5 countries to 

better allgn the value of the world's major trading currencies 

with fundamental forces has resulted in a significant decline 

in the dollar in foreign exchange markets. This has improved 

chances that a larger share of domestic demands can be met 

by U.S. producers, At the same time, the monetary authorities 

have maintained a steady course in order to minimize the 

possrbility of a destabilizing fall in the dollar's foreign 

exchange value. 
Despite some slippage in economlc growth in the fourth 

quarter of 1985, the new year has brought new momentum, 

December data on employment, production and income all showed 

strong improvement and portend an acceleration in growth in 

the current quarter, albeit to a pace that is sustainable 

without a pickup in inflation. Consequently, the mood of 

investors remains cautiously optimistic, 

Against this background the Committee recommends the 

following securities be sold at yield auction to refund 

$9.8 billion of maturing February 15 securities and raise 

$13.2 billion of new cash: 

$9 billion of 3 year notes due 2/15/89 

$7 billion of 9 3/4 or 10 year notes 

$7 billion of 29 3/4 or 30 year bonds 

A motion to sell $8 3/4 billion of 3 year, $7 billion 

of 9 314 or 10 year and $7 l/4 billion of 29 3/4 or 30 year 

securities was defeated by a vote of 14-6. 

The Committee debated at some length the question of 

reopening the outstanding 9 1/28 notes of 11/15/95 and the outstanding 9 7/8% bonds of 11/15/20l5. Arguments for included 

the scarcity value of outstanding securities, which it is 

believed would result in a lower interest cost to the Treasury 

in next week's auction. Arguments against focused on the 

high premiums associated with the outstanding issues and 

the possibility that this would discourage buyers, 

The Committee voted 14 to 6 to reopen the outstanding 

10 year note and 10 to 8 with two abstentions to reopen the 

outstanding 30 year bond, We will expand on these views in 

discussion following this report. 

For the remainder of the quarter we recommend: 

- - Sell $9 billion of year bills at two auctions 

raisinq $1-0 billion, 

- - Sell $9.5 billion of 2 year notes at two 

remaininq auctions raising $2.0 billion, 

-- Sell $7.5 billion of a 5 year note to raise 

all new cash. 

- - Sell $6.75 billion of a 4 year note raising 

$3.0 billion. 

The Committee also recommends that remaining 3 and 6 month 

bill sales be kept at $14-4 billion, reducing cash receipts 

by $2-4 billion. 
Summary of Cash raised (net of foreign add-ons) 

Refunding $13.2 billi an 

52 week bills 1.0 

2 year notes 2.0 

5 year notes 7-5 

4 year notes - 3.0 

26-7 

Already raised - 12.0 

38.7 

Less reduction 

in 3 & 6 month bills 2.4 

$3675 billion 

Decrease in cash 

balance 2 1 

$- billion 

Cash balance 3/31/86 $10.0 billion 

Foreign add-ons of from $1 to $2 billion would slightly raise 

the cash balance. It is the Committee's understanding that 

the size of the refunding plus any other cash raised would negate 

the necessity of the issuance of any intraquarter cash management 

bills, 

The Committee by a vote of 17-3 recommends a June 30 cash 

balance of $20 billion, The 3 negative votes were for a $15 

billion cash balance, 

The Committee took considerable time in deciding to respond 

to the request for comments on the market for a foreign targeted 

Treasury issue. By a vote of 11-9 we recommend against such an 

issue. The majority believes that there is little or no beneEit 

in interest cost to the Treasury and has the view that the buyers 

will purchase r~gular Treasury issues as readily as targeted 

issues, 

The others believe that there would be an interest rate 

savings, especially if the targeted issues were sold on a regular 

basis so the market knew what to expect, 

With respect to the appropriate balance between bill and 

coupon issues in financing through June, the Committee retains 

its established stance oL debt extension emphasizing longer dated 

securities at the expense of bills. However, the Committee 

is aware that the implementation of Gramm-Rudman could cause a 

chdngr in its focus. In the past, with large continuing deficits, 

their focus has been @in increasing longer term Financing because 

of the burgeoning debt. If substantial reductions in deficits 

were to occur, the Committee would like the opportunity to review 
these policzes, possibly at a special meeting at the Secretary's 

request. 

Finally, we would encourage the Treasury to reexamine the 

STRIPS program with a view toward putting into effect the final 

phase of the program -- that is, the ability to reconstitute the 

original security. In addition, because of uncertainty in foreign 

tax laws, the liquidity of the entire STRIPS sector has been impaired and many domestic market makers have become unwilling 

to carry large inventories resulting in inefficient markets and 

wide spreads in yield affecting the entire program. The issue 

.is too complex to cover in this report, but we encourage the 

Treasury to study the question, We will, of course, help in 

any way we can. 

Mr, Secretary, this concludes our report and we welcome 

questions and discussion. 

~espectfully submitted, 

&dale 13. Horowitz 

Chairman 
REPORT TO THE SECRETARY OF THE TREASURY 

FROM THE U.S, GOVERNMENT AND FEDERAL 

AGENCIES SECURITIES COMMITTEE OF THF 

PUBLIC SECURITlES ASSOCIATION 

APRIL 30, 1986 

Dear Mr. Secretary: 

Since the Committee last met in Washington in January, 

the rally in financial markets has attained dramatic proportions. 

From already substantially reduced levels, long-term interest 

rates have dropped nearly two percentage points to some of their 

Lowest levels in nine years, Short-term interest rates, encouraged by two 50 basis point reductions in the Federal Reserve's 

discount rate, have fallen by a percentage point over this period, 

A number of developments beyond the easing in U,S, monetary 

policy have been responsible far the tremendous improvement in 

financial markets. The sharp decline in world oil prices since 

the start of the year and the prospect of continued financial 

constraints on major oil producers have dampened considerably 

investor expectations of inflation. That improvement adds to an 

already well-established tendency in the economy toward disinflation, 

Yconomic expansion has also proceeded at a modest pace in the 

first part of 1986, though at a slightly higher rate than that 

which characterized much of 1985, Apart from encouraging bond 

market investors, this has meant that business short-term borrowing 

needs have been rather limited in this period, Nonetheless, corporations have taken advantage of the slide in long-term rates to float 

a record volume of corporate bonds, Over the first four months of 

this year, new issue activity in the U,S, corporate market has 

averaged more than $16 billion or easi,ly twice the pace of 1985, 

The coordinated international effort to lower interest rates 

has allowed a continued reduction in the value of the dollar in 

foreign exchange markets in recent months, That decline has bolstered hopes for stronger economic growth in the Onited States. It 

has also introduced some uncertainty as to whether large inflows of 

foreign capital could be expected to continue at current or lower 

interest rates, 

The tentative signs of stronger economic growth evident during 

the first quarter should become more tangible as the year unfolds, 

Declines in interest rates and oil prices promise to boost private 

domestic final demands, while a pickup in growth abroad and a lower 

dollar will raise tJ,S, exports, The lower dollar and a better 

balance between inventories and sales mean that an increasing share 

of v,S. demand will be satisfied out of current domestic prodl~~tion 

rather than from inventories or imports, That improvement may come 
des&ite continuing efforts at slowing fiscal stimulus. 1t js 

against this economic and financial backdrop that investors are 

approaching the Treasury's upcoming mid-quarter financing-- 

guardedly optimistic. 

hith these developments in mind, the Committee recommends the 

following securities be sold at yie1.d auction to refund $14.2 billion 

or maturing May 15 securities and raise $12 billion of new cash: 

$9 billion of 3-year notes due 5/15/89; 

$8 1/2 biilion of 10-year notes due 5/15/96; 

$8 l/Z billipn of 30-year bonds due 5/15/2016 

This package assumes continuation of the 20-year bond cycle 

which the Committee voted 14 to 5 to retain. The majority felt 

that the 20-year bond was an effective long-term security which 

would not easily be replaced. The minority viewed the 20-year 

as more expensive and wanted to emphasize the mid-quarter refunaings as a source of long term funds, 

For the remasnder of the quarter the Cornmlttee recommends: 

Sell $9.75 billion of 2-year notes at two remaining auctions 

raising $2.0 billion of new cash; 

Sell $7.75 blllion of 5-year notes to raise all new cash; 

Sell $7-25 billion of 4-year notes raising $3.0 billion 

new funds, 

The Committee also recommends rolling over all bill maturities 

for no net additional cash, 

Summary of cash raised: 

Ref undings 

2-year notes 

5-year notes 

$-year notes 

$11 -80 billion 

2-00 

7.75 

Already raised 8-75 

$33-30 

Estimated Foreign Add-ons 1,20 

Met Market Borrowings $34.50 billlon 

This would bring the projected cash balance on 6/30/80 to 

$18.2 billion. The Committee voted unanimous1.y to target a 

$20 billion cash balance on 9/'30/86. 
As stated earlier, the Committee voted for the retention of 

the 20-year bond cycle. However, the Committee did consider what 

should be done if the cycle is discontinued. Ee discussed three 

alternatives. The first was a progressive phase-in of 10-year and 

30-year issues as replacements for the 20-year bonds. The second 

was an immediate increase in 10- and 30-year j'ssues to fully offset 

the $5 billion lost through the elimination of the 20-year bonds, 

The third was the replacement of the 20-year cycle with a new 

40-year bond, probably on a phased basis. Ten members of the 

Committee voted for the first alternative, 3 for the second 

and 6 tor the third, 

The Committee conqidered methods for adjusting to cashflow probLerns at the beginning of the calendar quarters that 

would be caused by loss of funds from discontinuing the 20-year 

cycle, It was unanimously agreed that targetting quarter-end 

balances $5 billion higher ($20 billion on June 30 and $25 

billion on September 30) would alleviate this problem, Purthermore if the 20-year cycle was immediately discontinued, the 

appropriate level of the May refunding would be $28 billion 

composed of $9 billion 3-year notes and $9 l/2 billion each of 

the 10-year and 30-year issues. 

Mr. Secretary, this concludes our report and we welcome 

questrons and discusslon. 

Respectfully submitted, 

Gedale 8. Ho 

Chairman 
REPORT TO THE SECRETARY OF THE TREASURY 

FROM THE U.S. GOVERNMENT AND FEDERAL 

AGENCIES SECURITIES CO%MITTEE OF THE 

PUBLIC SECURITIES ASSOCIATION 

July 30, 1986 

Dear Mr. Secretary: 

Since the Con~mittee's iast mecti.ng in April., money market 

i.ntc:rcst rates have Fallen about one-half percentage point.. 

'i'l1i.s has reflected the sluggish trend of the economy and the 

at-tcndiint moderate pace' of short-term credit demands. Rate 

declines have also been encouraged by an accommodative Federal 

Reserve, which has reduced the discount rate for the third 

time this year. Long-term interest rates, meanwhile, have 

traded in a voL~tile pattern around their lowest levels in 

nearly a decade. The disparate trends in these two markets 

is symbolic of market perceptions: financial market participants, as well as policymakers, sense that the cconcmy 

I.acks the momentum to produce strong credit needs but there 

is considerable uncertainty about the prospective course of 

events later this year and next. 

That uncertainty is evident. for a number of reasons. 

,-. ihrce r.ievelopments that hail been Che basis for considerab1.e 

opt-imisiii about economic prospects earlier this year -- fall.i,t~g 

interest rates, lower oil prices and a weaker U.S. dol-lar -- 

Tire having mixed success in generat i.ng faster growth. Most 

rioLahLy, although the dollar's decl.ine i.n foreiyn exchange 

rnarket.~ promised to halt a det-eriorating trade balance, disa!?lm i,n? ing growth abroad and only inoilerale .increases in rmn- 

["it-roleurn import prices to date have raised new clortbtc aboutthe timi.ng and extent oE that improvement. 

The continuing slide in iint-erest rates has E>&vid&rl 

i,iici.,ortlint support to housing activity where starts have been 

maiiitaineci at their strongest pace since 197R. Also, lower 

ratci; have spurred consumpti.on of i.nterest-sensitive durab1.e 

good:; such as autos in the face of moiicriitc: income growth. 

Dill some of khe drop in i.nterest rakes has reklected declinirig 

.irifl at ion expectations, so that real interest rates have 

:a? 1~e;n Ear less than notninul iinterest rat-6:s. 
-2- 

Finally, although financial market participants have 

shown concern at times about the rapid growth of 541, the 

evidence from the modest growth of the broader monetary 

aggregates, as well as the economy and prices themselves, 

suggests that thls does not represent an excessive buildup 

of liquidity, Thusr while several developments in the 

economy and with regard to policy have set the stage for 

faster economrc growth, an acceleration from the modest 

expansion of the flrst half remains somewhat elusive* It 

is against this backdrop that investors approach the upcoming 

Treasury financing. 

With these developments in mind, the Committee recommends 

that the following securities be sold at yield auction to 

refund $14.3 billion of maturing August 15 securities and 

raise $14-7 billion of new cash: 

$ 9 billion of 3-year notes due 8/15/89; 

10 billion of 9-3/4 year notes due 5/15/96; 

10 billion of 29-3/4 year bonds due 5/15/2016 

This recommendation incorporates the reopening of the 7-3/8% 

notes due 5/15/96 and the 7-1/48 bonds due 5/15/2016, The 

vote of the Committee on reopening both issues was unanimous, 

a somewhat rare occlrrence. The reason for this unanimity was 

the strong feeling that the elimination of the 20-year bond 

had decreased supply in the long bond market and made for 

considerable difficulty in maintaining a viable market place 

for long United States Treasury debt, With only four long 

bonds a year, a size vs, frequency situation occurs. Lack of 

frequency dictates greater size of issues for an effective 

market, Foreigners buying plus the stripping potentiality 

of these bonds can severely limit their availability, A 

side effect of this scarcity is the problem created in 

pricing corporate securities which for at least the last 

eight years have been priced off the Treasury curve, 

Mr, Secretary, the Committee unanimously feels that the 

change in frequency of sales of long Treasury bonds, makes it 

absolutely essential that the 30-year and 10-year issues be 

reopened whenever possible. The suggested $10 billion amounts 

of the 9-3/4 and 29-3/4 year issues are in line with the reeommendation made by the Committee in its report of April 30, 1986 

in which a progressive phase-1n of the amounts lost by the 

elimrnation of the 20-year bond was favored by a majority of 

this Committee, We believe that the market can handle issuesof the recommended size, especially if they are reopened. 
For the other financing requirements in the remainder of 

the quarter, the Committee recommends: 

-- Maintain the 3- and 6-month Treasury bill auctions 

at the current $15.2 billion level raising $8-9 blllion 

of new cash; 

-- SelL $9.5 billion of year bills at the remaining auction 

raising $1.4 billion new cash; 

-- Sell $10 billion of 2-year rates at two remaining 

auctions raising $2-1 billion of new cash; 

-- Sell $8 billion of 5-year notes to raise all new cash; 

-- Sell $7-5 billion of 4-year notes raising $2 billion 

of new cash 

Summary of Cash Raised 

Refunding 

3 & 6 month bills 

52 week bills 

2-year notes 

5-year notes 

4-year notes 

Already raised 

Estimated Foreign Add-ons 2.00 

Net Market Borrowings $52-00 billion 

This would produce a projected cash balance on 9/30/85 

of $27 billion, an amount which the Committee, because of 

projected 4th and 1st calendar quarter financing needs, 

unanimously recommends, We also suggest a $20 billion cash 

balance on 12/31/86. 

In attempting to respond to the request in the Committee 

Charge as to the pattern of 2-year notes with relatlon to 

quarter end finaneings, a wider discussion ensued, We felt 

that, along with the elimination of the 20-year bond, the 

scheduling request of the current charge, the increasing 

amount of refunding of outstanding debt necessary especially 

in view of the maturities of the 5- and 7-year notes and the 
reduction in frequency of sales of long term honds to four times a year tlict 

a special meeting of this Committee might be required to give intensive study 

to the entire debt structure. There is some feeLing in the group that selli~~g 

30-year bonds eight times a year might be desirable. lf that is not possible, 

then selling 40-year bonds might be a proper vehicle for effective debt maaagement. We therefore ask you, Mr. Secretary, to call such a meeting if yoti 

desire, with the only nintter to be discussed, the Committee's opinion on 

proper debt structure for the next period of years. We would ask you to call 

the meeting, to be held in New York at the Federal Reserve Bank, as soon as 

possible. Hopefully, the Gramm-Rudman and tax bill questions will lye settled 

shortly and we can make our recommendations based on some firm projectioiis. 

Because of our rrqutst for Li special meeting, five nieinbers of the 

Committee,felt no change in the scheduling of the two year bond should be nade 

until after that meeting. However, sixteen members voced to incorporate the 

two year bond into the end of quarter financing. Therefore, our recommendation 

is that the two, fuur, and seven year bonds be announced on September 16, with 

the sale of the two year on Tuesday, September 23, the sale of rke four year 

on Wednesday, September 24, and the sale of the seven year on Thursday, 

September 25. In view of this schedule, the fifty-two week bill should be 

sold on Tuesday, September 30. 

Ti you should decide to make this scheduling change, we would 

encourage you ro announce it this afternoon at the press conference, 

Mr. Secretary, this coixl.isdes our report and we welcome questions and 

discussion. 

Gedale R. Horowitz 

Chairman 
REPORT TO TEE SECRETARY OF THE TREASURY 

FROM THE U.S, GOVERNMENT AND FEDERAL 

AGENCIES SECURITIES COMMITTEE OF THE 

PUBLIC SECURITIES ASSOCIATION 

October 29, 1986 

Dear Mr, Secretary: 

Since the Committee last met in Washington in July, interest 

rates have displayed quite disparate trends, Whereas, short-term 

interest rates have declined by one-half of a percentage point or 

more, aided by the Federal Reserve's fourth discount rate reduction 

this year, longer-term interest rates have generally risen by 

one-quarter to one-half percentage point, The consequent sharp 

steepening in the overall yield curve ha,s carried the spread 

from short-term bills to long-term bonds to its widest levels in 

a year, This shift has been characterized by the perception that 

monetary stimulus and a weaker dollar may fuel stronger economic 

growth with rising inflation pressures, 

Several cross-currents in the economy and domestic and international financial markets are responsible for this development, 

Real economic growth in the United States has continued on the 

2 1/28 track that has prevailed since the middle of 1984, This 

mildly subpar pattern has persisted despite increasing monetary 

accommodation, lower oil prices and further declines in the foreign 

exchange value of the dollar. Although each of these influences 

has served to stimulate demand in the economy, much of it has 

gone into increased imports rather than domestic production, 

The lack of significant improvement in the U,S, trade deficit 

remains a key impediment to robust economic expansi.on, The dollar's 

fall has yet to trim the trade gap, as demand growth in the U.S, 

continued to outpace that of our trading partners, Moreover, the 

relative prices of tradeable goods have changed only little. In 

fact, in the September quarter, the ratio of nonoil import prices 

to nonoil producer prices actually declined, 

One favorable consolation from the faj.led improvement in 

the trade balance is that inflation remains relatively subdued 

despite signs of bottoming out in oil prices. Competitive pressures 

among import-competing manufacturing industries remain intense 

while the growth in labor costs has continued to decelerate, An 

environment of sluggish economic growth i.s not one in which inflation is likely to accelerate meaningfully, while wage increases 

in the first six months of 1986 have run at their lowest levels 

in twenty years, These facts stand in contrast to the incipient 

fears in financial markets of rising inflation. 
Those fears are rooted in part in the concern that monetary 

policy has tolerated too rapid expansion in the monetary aggregates, 

Much of this strength, however, has been concentrated in the 

primary Ml measure, while growth in the broader money stock 

components has remained within official target bands, Although 

the Federal Reserve has encouraged substantial declines in interest 

rates, key interest-sensitive areas of the economy are not poised 

for strong growth, Housing starts, for example, have slipped well 

below their early 1986 pace as new home sales have dropped 23% in 

recent months, Similarly, the nonresidential construction sector 

is cooling after several years of substantial investment in 

commercial property development* 

Although the pace of private credit needs has been moderate 

in an environment of low inflation and subdued economic growth, 

financial markets have recently grown uncertain about the continued 

willingness of private ,foreign investors to aid in the financing 

of large U.S, budget deficits. Recent international. payments 

statistics indicate a marked step up in foreign official purchases 

of U,S. Treasury securities paralleling continued strong private 

inflows. Should the composition of future inflows begin to shift 

to a reliance upon those official investments and a relative 

decline in private inflows, financial markets could become unsettled, Nonetheless, there j.s the promise of a measurable 

reduction in the U.S, budget deficit for the coming year, aided 

by new tax revenues and modest spending reductions. Indeed, any 

pickup in economic growth wil.1 aid in that process. Further, 

very recent signs of strength in the dollar in foreign exchange 

markets attest to the continued interest of foreign investors in 

U-S, securities, 

Against this mixed pattern of economic and financial developments the Committee recommends that the following securities be 

sold at yield auctions to refund $13-4 billion of publicly-held 

notes and bonds maturing November 15 and raise $16-1 billion of 

new cash: 

$10 l/4 billion of 3 year notes due 11/15/89 

9 3/4 billion of 10 year notes due 11/15/96 

9 l/2 bil Lion of 30 year bonds clue 11/15/2016 

The Committee discussed the possibility of reopening the 10 

year note due 5/15/96 and the 30 year bond due 5/15/2016. It 

unanifnously opposed the reopening of the thirty year bond and by 

a vote of 13 to 6 also opposed the reopening of the ten year note, 

The majority of the Committee felt that the benefit of market 

iiquidity in larger issues was outweighed by the possible future 

debt management problems of extremely large maturities and the 

fact that a new issue would sell at a slightly lower yield than a 

reopened one, However, the Committee still believes that the 

liquidity and viability of the market for U.S, Government securities 

requires the reopening of outstanding issues when other circumstances 

do not make reopening impractical, 
For the other financing requirements in the remainder of 

the quarter the Committee recommends: 

-- Increase the remaining 3 and 6 month Treasury 

bill auctions to $l6,4 billion raising $12-6 

billion of new cash; 

-- Increase the two remaining 52 week bills to $10 1/2 

billion raising $2.6 billion; 

-- Sell $7 b~lllon of cash nanageincnt brlls maturlng 

January 22; 1981 ralslng all new cash; 

-- Sell $10 1/4 billion of 2 year notes at two remaining 

auctions raising $1 l/2 billion new cash; 

-- Sell $7 3/4 billion of 4 year notes raising $2-2 billion 

of new cash; 

-- Sell $8 1/4 billion of 5 year notes to raise all new 

cash, 

Summary of Cash Needed 

Refund r ng 

3 h 6 month brlls 

52 week bllls 

2 year notes 

4 ytar notes 

5 year notes 

Cash Manaytmcnt b~ils 

already raised 

Estimated Foreign Add On 2,2 ,. , -- Net Xarket Borrowing $62.5 Billion 

This would produce a projected cash balance on 12/11/86 of $20 

billion, an amount which the Committee unanimously recommends. We 

also suggest a $15 billion cash balance on 3/31/81. 

The Committee has taken into account the current slope 01 the 

yield curve in its recommendations, It does encourage the sale 

of the entire recommended amount of 30 year bonds as this is the 

only security larger than the 10 year sold by the Treasury, A 

viable long bond market is necessary for both future Treasury 

debt management and For market participants, 

While the Committee reiterates its suggestion of July 30, 1986 

that the 2, 4 and 7 year notes be sold in the same week, it 

understands the impracticality of doing this at the end of December. 
It therefore recommends that the 2 and 4 ycdr notes hc announced 

on 12/10/86 with the 2 year bilng auct~oned on 12/17/85 dnd the 

4 year on 12/18/86. The seven-year note should be announced on 

12/16/86 and sold on 12/30/86. The 52 week blll should be 

announced on 12/12/86 and sold on 12/23/86. 

Mr. Secretary, this Committee stands ready to assist the 

Treasury in any way it can in the formulation of policies and 

rules for the regulation of the Government securities market, 

We believe that because of its fiducj-ary relationship to the 

Treasury this group could be used as an impartial resource to 

answer any inquiries that the Treasury might have, We stand 

ready to serve if asked, in this matter, 

Finally, before responding to questions, we would be remiss 

in not noting two significant changes in the structure of this 

Committee, First, the Committee extends its deepest appreciation 

to Frank Cavanaugh for his guidance and assistance in the 

performance of our task, Frank has servcd both the Treasury and 

the Committee most faithfully and we wish him well in his new 

endeavor. 

Today, marks the final meeting of the Dean of our group, 

Bob Stone. Bob has been on this Committee for 21 years and has 

served as its Chairman and Vice Chairman. More than these official 

titles, he has served as mentor for all of us in the workings of 

ouc group. His concern that we serve only to assist the United 

States Treasury has been deeply ingrained in all of us and if 1 

may take a liberty, I believe that not only are all his fellow 

Committee peop1.e better for Bob's service, but so is our country. 

Thank you, Mr, Secretary.