MINUTES OF THE MEETING OF THE
TREASURY BORROWING ADVISORY COMMITTEE
OF THE BOND MARKET ASSOCIATION
October 27, 1998

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

Deputy Assistant Secretary for Federal Finance Roger Anderson 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). Jill Ouseley,
Director, Office of Market Finance, and Paul Malvey, Associate Director, Office of Market
Finance, presented the chart show, which had been released to the public on October 26: (1)
updating Treasury borrowing estimates; (2) providing statistical information on recent Treasury
borrowing and market interest rates; and (3) summarizing the October 1998 update of the study
released in 1995 regarding Treasury experience with uniform-price auctions. The update was
also released to the public on October 26.

The public meeting ended at 9:35 a.m.

The Committee reconvened in closed session at the Madison Hotel at 12:15 p.m. All
members were present. Deputy Assistant Secretary Anderson gave the Committee its Charge,
which is also attached. Assistant Secretary Gensler and DAS Anderson participated in the
meeting.

The Committee began by reviewing profotina financing schedules for the October-
December and the January-March quarters (attached) that were developed by one of the
members. Considering the November refunding first, the Committee voted by 14-to-5 to
recommend a November refunding package totaling $39 billion, which is at the top of the range
suggested in the Treasury Charge, consisting of: $17 billion of 5-year notes; $12 billion of 10-
year notes; and $10 billion of 30-year bonds.

The discussion then turned to whether to reopen any outstanding securities. By a vote of
15-to-4, the Committee decided to recommend issuance of a new 10-year note, rather than
reopening the 5-5/8% note of May 15, 2008. By a vote of 13-to-6, the Committee decided to
recommend issuance of a new 5-year note rather than reopening the 5-1/4% Treasury note of
8/15/03. The Committee voted by 9-to-9 with one abstention on the question of reopening the


2

outstanding 5-1/2% bond of August 15, 2028 or recommending that the Treasury issue a new 30-
year bond.

By consensus, the Committee decided to recommend that the Treasury follow the
October-December and January-March financing plans in the proformas, except with adjustments
to the auction sizes in the November and February refundings to reflect the Committee’s
recommendations and with adjustments to cash management bills in light of the question in the
Treasury Charge pertaining to issuance of 79-day cash management bills on November 3.

The Committee then discussed the question in the Charge regarding current conditions in
the Treasury market. The result of the discussion was that the Committee voted by 9-to-9 with
one abstention on the question of recommending that the Treasury reopen outstanding on-the-run
notes and bonds from time to time and use the proceeds to purchase higher coupon off-the-run
securities.

The Committee discussed the question in the Charge pertaining to whether to extend the
use of uniform-price auctions to all marketable Treasury securities and voted to recommend that
the Treasury do so (16 yes, 3 abstentions).

Regarding new issues of inflation-indexed notes and bonds, the Committee consensus
was that the Treasury could reduce the size of new issues in light of reduced Treasury borrowing
needs and the reductions that already have been made in funds raised through issuance of
nominal securities without showing any reduction in commitment to the program.

The meeting adjourned at 2:10 p.m.


The Committee reconvened at the Madison Hotel at 5:45 p.m. All members were
present. The Chairman presented the Committee report to Assistant Secretary Gensler, Assistant
Secretary Hammond, and Deputy Assistant Secretary Anderson. Committee members
commented on whether issuing a new security or reopening an outstanding issue tends to be
more efficient for the Treasury. Considerations suggested were market conditions at the time of
the auction and market liquidity over the longer term.

. Ouseley, Director
‘fice of Market Finance
October 28, 1998

The meeting adjourned at 6:20 p.m.

cmt: NR Sie

Stephen Thieke, Chairman

Treasury Borrowing Advisory Committee
of The Bond Market Association

October 28, 1998