MINUTES OF THE MEETING OF THE

TREASURY BORROWING ADVISORY COMMITTEE

OF THE BOND MARKET ASSOCIATION

November 2, 1999

The Committee convened at 9:00 a.m. at the Treasury Department for the portion of the 

meeting that was open to the public. All members were present except Mr. Axilrod. The 

Federal Register announcement of the meeting and a list of Committee members are attached. 

Under Secretary for Domestic Finance, Gary Gensler, welcomed the Committee and the 

public to the meeting. John Auten, Director, Office of Macroeconomic Analysis, summarized 

the current state of the U.S. economy (statement attached). Paul Malvey, Acting Director, 

Office of Market Finance, presented the chart show, updating Treasury borrowing estimates 

and historical debt and interest rate statistics. 

The public meeting ended at 9:26 a.m. 

The Committee reconvened in closed session at the Madison Hotel at 11:45 a.m. All 

members were present except Mr. Axilrod. Assistant Secretary for Financial Markets, Lee 

Sachs, gave the Committee the charge, which is also attached. 

The Committee began by reviewing a proforma financing plan (attached) for the 

October-December quarter. The Committee recommended that Treasury achieve its $70 billion 

targeted end-of-December cash balance by maintaining weekly bill offerings at $18 billion 

through the fourth quarter. The weekly bills could be supplemented by cash management bills 

that are traditionally issued in late November and early December. 

A discussion ensued regarding the question of reopening the 10-year notes ( 6% 

8/15/09). The Committee discussed the trade-offs of the cost savings associated with a new 

issue, which some members estimated to be 3 to 5 basis points, versus the benefits of having a 

double issue and the associated greater liquidity, especially going into the new year, in order to 

assuage market concerns. Members discussed the merits of issuing a new 10-year security in 

November, and perhaps, implementing a regular reopening policy starting in February with a 

reopening of the November 10-year note. The Committee proposed, on a 13-to-5 vote, that the 

November refunding consist of 5-year notes in the amount of $15 billion and a reopening of the 

10-year notes (6% 8/15/09) in the amount of $10 billion. They recommended that a policy of 

regular reopenings begin with a new issue in February. They recognized that a regular 

program of 

reopenings would require a change in OID regulations and reiterated their earlier 

recommendation that those rules be amended. 
The Committee discussed the composition of Treasury financing for the remainder of the 

October-December quarter and for the January-March quarter. The members= consensus was 

that the market was expecting Treasury to issue two CMBs to finance the November and 

December low cash points. These CMBs would mature after the mid-January tax payment date. 

The Committee also suggested that Treasury be clear as to financing needs going into 

year end to allay market concerns regarding year-end liquidity. Assistant Secretary Sachs 

indicated that Treasury would be as clear as possible. 

Regarding the January-March quarter, the Committee agreed to follow the financing 

plan in the proforma table (also attached). 

The Committee next turned its attention to the question in the Charge regarding the large 

fluctuations in cash balances over recent years. The Committee discussed whether there were 

costs associated with large swings, with some members indicating that the weekly bill market 

was capable of absorbing moderate swings in issue sizes. Other members pointed out that the 

sizes of the swings were relative to overall issue sizes, with larger swings having less onerous 

effects on liquidity when overall issue sizes were larger. The members recommended that the 

Treasury consider eliminating the 1-year bill at some point in the future and increase the sizes of 

the weekly bills. 

In response to the question in the Charge regarding to recommendations on technical 

issues pertaining to the structure of the buy-back program, the Committee observed the 

following: A majority of the members agreed that maximum flexibility and minimal 

transparency would translate into greater cost savings for the Treasury when Treasury is 

seeking to purchase securities. The Committee generally felt that Treasury should not conduct 

buy-backs on a regular and predictable basis, and that announcement lead times should be 

relatively short, but of sufficient length to allow investors to respond. With relatively short lead 

times and in order to address logistical concerns, the Committee suggested settlement be 

extended to T+3, consistent with the practice in corporate markets. To avoid announcement 

effects, a consensus of the members felt that announcing targeted maturity sectors was 

preferable to announcing specific CUSIPs. The clear consensus of the members was that 

Treasury not, in any way, limit the amount of any given security it would repurchase. 

The meeting adjourned at 12:58 p.m. 

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

present except Mr. Axilrod. The Chairman presented the Committee report to Assistant 

Secretary Sachs. A brief discussion followed the Chairman=s presentation, but did not raise 

significant questions regarding the report=s content. 
3 

The meeting adjourned at 6:10 p.m. 

Fred E. Pietrangeli, 

Senior Financial Economist 

Office of Market Finance 

November 2, 1999 

Certified by: 

Kenneth M. deRegt, Chairman

Treasury Borrowing Advisory Committee

of The Bond Market Association

November 3, 1999