NINUTES OF TEE MEETING OF TEE 

TREASURY BORROWING ADVISORY COMMITTEE 

OF THE PUBLIC BECURITIES ASSOCIATION 

MAY 2 AND 3, 1995 

Mav 2 

The Committee convened at 11:45 a.m. at the Treasury 

Department for the portion of the meeting that was open to the 

public. Members present were Chairman Francis, Vice Chairman 

Kelly, Messrs. Ahearn, Bennett, Capra, and Corzine, Ms. 

Kenworthy, and Messrs. Lakefield, McKnew, Napoli, and Pike, Ms. 

Recktenwald, and Messrs. Roberts, Rosenberg, Sites, Stark, 

Thieke, and Wardlaw. The Federal Reaister announcement of the 

meeting and a list of Committee members are attached. 

Deputy Assistant Secretary for Federal Finance Darcy 

Bradbury welcomed the Committee and the public to the meeting. 

Assistant Secretary for Economic Policy Alicia Munnell gave a 

summary of the current state of the U.S. economy. Jill Ouseley, 

Director of the Office of Market Finance, presented an 

informational briefing updating Treasury borrowing estimates and 

statistical information on recent Treasury borrowing and market 

interest rates. The borrowing estimates and other information in 

chart form had been released to the public on May 1, 1995. 

The public meeting ended at 12:25 p.m. 

The Committee reconvened in closed session at the Madison 

Hotel at 1:45 p.m. The members listed above, Ms. Bradbury, Mr. 

Norman Carleton, Director of the Office of Federal Finance Policy 

Analysis, and Ms. Ouseley were present. Ms. Bradbury gave the 

Committee its Charge, which is also attached. The Committee 

first discussed the size of the Treasury cash balance at the end 

of June. By consensus, a $45 billion balance was recommended. 

The Committee then turned to the May midquarter refunding, 

discussing the need to increase the sizes of Treasury coupon 

issues in order to raise cash needed by the Treasury in the 

refunding and beyond. A draft proforma that had been prepared by 

a member of the Committee (attached) was used during the 

discussion. 

The Committee voted 17-to-1 to recommend increasing the 3- 

and 10-year notes by $1.0 billion each from the levels of the 

February refunding to $18.0 billion for the 3-year notes and 

$13.0 billion for the 10-year notes. The vote to recommend a new 

10-year rather than to reopen the 7-112% note of 2/15/05 was 15- 

to-3. The consensus was that the Treasury should also issue cash 

management bills to settle with the refunding issues on May 15. 

The bills would be a $10.0 billion issue to mature on June 22, 

1995 and a $10.0 billion issue to mature on September 21, 1995. 

The Committee recommended by consensus that the Treasury leave 

the 2- and 5-year notes at their April levels in the May and June 
offerings and that the 52-week bill remain at $17.75 billion 

during the rest of the quarter. 

For the July-September quarter, the Committee consensus was 

that the $30 billion end-of-quarter balance recommended by the 

Treasury is appropriate. The Committee's preliminary consensus 

recommendation was that the Treasury increase the sizes of the 

coupon issues and 52-week bills by $.5 billion each from the 

sizes in the April-June quarter and increase the 30-year bond by 

$1.0 billion from the level in the February refunding to $12.0 

billion. Two members wanted to recommend an increase of $.5 

billion, rather than $1.0 billion in the August 1995 bond. 

Regular weekly bills would be adjusted appropriately. 

Alternative borrowina instruments 

Looking forward to 1996, when the 5-year notes which have 

been offered monthly since January 1991 begin to mature, the 

Treasury requested in its Charge that the Committee consider 

whether to recommend that the Treasury issue inflation-indexed 

debt securities to augment the current regular offerings of 

Treasury securities. 

Japanese yen-denominated debt. Several Committee members 

suggested that the Treasury consider issuing yen-denominated as 

soon as possible to raise funds at reduced cost. They suggested 

that the yen market is an attractive source of funding currently 

and that other borrowers are taking advantage of financing 

opportunities in yen. 

No recommendation was made on this proposal. Several 

members were concerned that any foreign denominated currency 

issuance by the Treasury be undertaken only in the context of 

achieving broader economic policy objectives. 

Inflation-indexed debt. Charts and tables (attached) were 

reviewed to frame the discussion on indexed securities. 

Potential demand for inflation-indexed debt was seen from defined 

contribution retirement plans, which tend to invest 

conservatively in shorter term instruments, and defined benefit 

retirement plans, which tend to prefer conservative longer term 

assets. The potential buyers were not viewed as likely to want 

to trade their securities, and therefore there was a concern that 

the market for inflation-indexed securities would be illiquid. 

In this connection, several members thought an inflation-indexed 

nonmarketable savings bond would be appropriate. 

The discussion then turned to whether the Treasury could 

sell enough inflation-indexed debt to make mounting a sales 

effort worthwhile at this time. The consensus was that now is 

not the time to introduce this new instrument for several reasons 
relating to: questions that have been raised recently about the 

accuracy of the consumer price index to measure inflation; the 

prospect that other debt management innovations, such as floating 

rate notes, would gain greater market acceptance now; and the 

Treasury's need to do more market research and to educate the 

public about inflation-indexed instruments before mounting a 

sales effort. The Committee did not address the specific terms 

that the Treasury might offer on inflation-indexed debt. 

The meeting adjourned at 4:40 p.m. 
The Committee reconvened at 8:30 a.m. at the Treasury in 

closed session. All members were present who attended the May 2 

meeting except Messrs. Corzine and Napoli and Ms. Recktenwald. 

The Chairman presented the Committee report (copy attached) to 

Deputy Secretary Frank N. Newman and Deputy Assistant Secretary 

Bradbury. 

A discussion followed the reading of the Committee report. 

-- Several Committee members believed that it is appropriate 

now to signal gradual, continuing increases the sizes of 

coupon issues in the future. 

-- Regarding the statutory debt limit, members suggested that 

the Treasury provide technical briefings on the ,potential 

disruptions in Treasury's regular borrowing and the 

securities markets as a result of a debt limit impasse for 

Congress members and their staffs who will be working on the 

issue this summer. 

The meeting adjourned at 9:00 a.m. 

l K. Ouseley, 

of Market 

Wmestic Finance V .a . 

May 3, 1995 

Attachments 

Certified by: 

Stephen C. Francis, Chairman 

Treasury Borrowing Advisory Committee 

of the Public Securities Association 

May 3, 1995