MINUTES OF THE MEETING OF THE 

TREASURY BORROWING ADVISORY COMMITTEE 

OF THE PUBLIC SECURITIES ASSOCIATION 

NOVEMBER 2 AND 3, 1993 

November 2 

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. Corzine, Mr. Menne, 

Mr. Pike, and Ms. Recktenwald. The Federal 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 

brief summary of the current state of the U.S. economy. I gave 

an informational background briefing updating Treasury borrowing 

estimates and statistical information on recent Treasury 

borrowing and market interest rates. The borrowing estimates and 

background information in chart form had been released to the 

public on November 1, 1993. 

At 10:OO a.m. the Committee met in closed session. Deputy 

Assistant Secretary Bradbury gave the Committee its nchargeme, 

which was to make recommendations on the November Treasury 

refunding and related matters. See the attached Charge. The 

Committee also discussed the open-meeting format for 

informational presentations to the Committee before the Committee 

meets in closed session to develop its financing recommendations. 

The partially open meeting format was agreed upon in negotiations 

between the Treasury and Congress on amendments to the Government 

Securities Act, which had not been enacted as of the date of the 

meeting. The Committee also discussed the practical aspects of 

producing the final report of its recommendations on the third 

business day after each meeting, instead of after one week, which 

has been the practice. The meeting adjourned at 10:35 a.m. 

The Committee reconvened at 1:35 p.m. in closed session at 

the Madison Hotel. The meeting began with a discussion of the 

likely overall Treasury financing need in the rest of the 

October-December quarter. Specifically, several members believed 

that the Treasury estimate of $85.2 billion of market borrowing 

for the quarter is too high. The Committee voted unanimously to 

recommend that the following issues be sold in the November 

refunding: 

$17.5 billion of 3-year notes, maturing 11-15-96 and 

$12.0 billion of 9 3/4-year notes, a reopening of the 

5 3/42 notes maturing 8-15-03. 
The Committee took the following into consideration in its 

recommendation to increase the size of the lo-year area note in 

the November refunding by $1.0 billion to $12.0 billion, compared 

with the increase of $.25 billion in the August refunding, and 

specifically to reopen the 5 314 percent notes of August 15, 

The 10-~aar note is in demand as an important hedging 

vehicle for corporate underwriters, mortgage-backed 

securities market participants, and swap market 

participants. 

The 5 314 percent notes are in tight supply in the 

collateral market, as evidenced in special repurchase 

agreement rates that are well below general collateral 

rates. 

The 10-year is the "new long bondw for many accounts, 

since the Treasury has cut back on issuing new 30-year 

bonds. A reopening would enhance its trading 

liquidity. 

Market conditions in the lo-year maturity area, 

evidenced by lo-year yields, are favorable for the 

Treasury as issuer. 

The elimination of new issues of 7-year notes and the 

reduction in the frequency of 30-year bond issues to 

semiannually from quarterly have reduced the tradeable 

supply of securities in the longer maturity area. 

The Committee consensus was that, if the Treasury were to decide 

to cut back the recommended size of the refunding, it would be 

preferable to pare the 3-year note. 

The Committee then turned to the Treasury's remaining need 

for cash on November 15 and the financing schedule for the rest 

of the fourth calendar quarter. The Committee voted unanimously 

to recommend Treasury cash balances of $35 billion on December 31 

and $20 billion on March 31. 

The consensus was that the large seasonal swings expected in 

the Treasury cash balance later this year and early next year 

call for more frequent issues of cash management bills, with few 

changes in the size of regular weekly bills. With this in mind, 

the Committee agreed in principle to the proposed financing 

schedule that is attached to the Chairman's report. The 
Committee also recommended by consensus that the Treasury issue 

about $14 billion of cash management bills for settlement with 

the midquarter refunding issues on November 15 and maturing on 

December 23. 

The Committee consensus was that the Treasury estimate of 

its January-March borrowing requirement, whose midpoint is $62.5 

billion, can be accomplished comfortably by increasing the size 

of the new coupon securities, issuing 30-year bonds, decreasing 

the size of weekly Treasury bills, and leaving 52-week bills 

unchanged from the levels recommended for the fourth calendar 

quarter. 

~egarding the calendar, the Committee consensus was that the 

fact that November 11 is a holiday necessitates auctioning the 

cash management bills recommended to settle on November 15 on the 

same day as the auction of one of the regular quarterly refunding 

issues. The Committee consensus preference was that the 3-year 

note be auctioned on November 9, with the CMB auction earlier the 

same day. The recommended calendars are attached to the 

Chairman's report. 

The discussion then turned to the subject of the 6 1/4 

percent Treasury bond of August 15, 2023. Committee members 

expressed the view that evidence of a shortage of the 6 114 

percent bond for trading in the cash market and in the collateral 

market raises a potential for a conflict between the reopening 

policy that the Treasury announced in the Joint Re~ort on the 

nt Securit es Market in January 1992 and the strategy, 

announced in May 1993, to shorten the maturity mix of new 

marketable securities offerings. 

The meeting adjourned at 3:20 p.m. 
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