MINUTE8 OF TEE MEETING OF THE 

TREASURY BORROWING ADVIOORY COMNITTEE 

OF THE PUBLIC SECURITIES ASSOCIATION 

MAY 3 AND 4, 1994 

The Committee convened at 11:30 a.m. at the Treasury 

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

public. All members were present, except Mr. Thieke. The 

Federal Redstex 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 K. 

Ouseley, Director, 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 2, 1994. 

The public meeting ended at 12:15 p.m. 

Hav refundinq 

The Committee reconvened in closed session at the Madison 

Hotel at 2:15 p.m. Deputy Assistant Secretary Bradbury gave the 

Committee its Charge, which is also attached. The Committee 

discussed the size of the May midquarter refunding within the 

context of the Treasury's estimate of $8 billion of net market 

borrowing during the April-June 1994 quarter. The Committee 

discussed recommending that the May refunding consist of $17 

billion of 3-year notes and $12 billion of 10-year notes, the 

same sizes as the 3- and lo-year notes offered in the February 

1994 refunding. 

Treasury borrowing requirements for the rest of the AprilJune quarter were then discussed. The consensus was that the 

Treasury should maintain the 1-year bills and 2- and 5-year notes 

at the levels of the most recent offerings -- $16.5 billion, $17 

billion, and $11 billion, respectively -- and increase the 

regular weekly bills. A short-term cash management bill was 

recommended to bridge the Treasury's temporary cash need prior to 

the June tax payment date. 

The Committee considered recommending an alternative 

financing strategy that would entail Treasury borrowing in 
somewhat longer maturities than those above. Several Committee 

members commented that the Treasury has relied relatively heavily 

recently on borrowing in the 2- to 5-year maturities. 

Transferring $1 billion of the refunding package from the 3-year 

note to the 10-year note would be well received by the market and 

contribute to debt extension. The Committee voted by 15 to 3 for 

the refunding package discussed earlier in the meeting, 

consisting of $17 billion of 3-year notes and $12 billion of 10- 

year notes. 

The Committee turned to Treasury borrowing in the JulySeptember quarter and expressed the view that the Treasury could 

borrow the needed $58.5 billion by maintaining coupon issues at 

their most recent sizes and increasing issues of Treasury bills. 

The consensus was that the deficit will not be as large as 

implied by the latest Treasury borrowing estimates. The 

Committee consensus was that the Treasury should issue a 29 314- 

year bond, to mature on May 15, 2024 in the August refunding. A 

29 3/4-year issue, with interest payments in May and November, 

would increase the trading liquidity of the STRIPS market. Cash 

balances of $40 billion were recommended unanimously for June 30 

and September 30. 

Sinale - mice auction 

The Committee agreed, by consensus, that the purposes of the 

single-price auction experiment are being met. Anecdotal 

evidence indicates that the securities are more widely 

distributed in the single-price auction and the Treasury's costs 

do not appear to be any higher than under the multiple-price 

auction format. Members observed, however, that the single-price 

auction has not been tested in a rising yield environment. While 

no vote was taken, Committee members favored extending the time 

period for the experiment and including Treasury securities of 

other maturities, Consideration of this matter was deferred 

until the August meeting. 

Committee members suggested that the Treasury include the 

following in its analysis of the auction results: the 

performance of the 2- and 5-year notes in when-issued trading 

during the hour before the auction and until the market closes on 

the day of the auction; concentration/dispersion of auction 

awards among bidders; coverage ratios; dispersion of yields that 

are bid in the auction; and noncompetitive participation in the 

auction. 

The meeting adjourned at 4:04 p.m. 
The Committee reconvened at 9:06 a.m. at the Treasury in 

closed session. All members were present, except Mr. Thieke. 

The Chairman presented the Committee report (copy attached) to 

Under Secretary for Domestic Finance Frank N. Newman and Deputy 

Assistant Secretary Bradbury. 

Members of the Committee were asked to"discuss extending the 

single-price auction experiment for one more year and including 

another Treasury security, such as the 1-year bill, 3-year note, 

or lo-year note, in the experiment. Committee members advised 

that it would be useful to obtain more data in today's higher 

yield market environment and to expand the experiment to auctions 

of other maturities. From a statistical viewpoint, the drawback 

of experimenting with the auction8 of longer term securities, 

especially the 30-year bond, is that there are not many 

observations. 

In response to a question, the Committee expanded upon the 

thoughts expressed in the Chairman's report on the balance 

between short-term and longer term borrowing. Members noted that 

the current focus on shorter term Treasury borrowing exposes the 

Treasury to changes in short-term interest rates. Also, with 

bank loans expanding, bank demand may diminish for Treasury 

securities in the shorter intermediate maturities. 

The meeting adjourned at 9:30 a.m. 

I 

Attachnentr 

certified by: 

11 K. Ouseley, ~irectoru 

fice of Market Finance 

onestic Finance 

May 4, 1994 

Treasury Borrowing Advisory Committee 

of the Public Securities Association 

May 4, 1994