MINUTES OF THE MEETING OF THE 

BORROWING ADVISORY COMMITTEE 

HE PUBLIC SECURITIES ASSOCIATION 

October 29 and 30, 1996 

October a 

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

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

public. All members were present, except Mssrs. Kessenich, Lyski, 

McKnew, Napoli, and Thieke. The Federd Register announcement of 

the meeting and a list of Committee members are attached. 

.Deputy Assistant Secretary fqr Federal Finance Roger Anderson 

welcomed the Committee and the public to the meeting. Assistant 

Secretary for Economic Policy Gotbaum summarized the current state 

of the U.S':economy. Paul Malvey, Associate Director, Office of 

Market Finance, presented the chart show, which had been released 

to the public on October 28, updating Treasury borrowing estimates 

and providing statistical information on recent Treasury borrowing 

and market interest *rates. 

The public meeting ended at 12:20 p.m. 

The Committee reconvened in closed session at the Madison 

Hotel at 2:30 p.m. The members were present who had attended the 

public briefing. Deputy Assistant Secretary Anderson gave the 

Committee its Charge, which is also attached. 

' . 

The Committee began by considering the attached proforma 

financing plan for the October-December quarter that had been 

prepared in advance by one of the members, using the market 

borrowing estimates that were'released by the Treasury on October 

28. The committee voted unanimously to recommend that the 

Treasury issue $18.5 billion 3-year notes, $10 billion 10-year 

notes, and $10 billion 30-year bonds. The committee also voted 

unanimously to recommend that Treasury reopen the October 10-year 

note to add to its liquidity in the secondary market. Finally, 

the committee voted unanimously to recommend that Treasury issue 

$13 billion in cash management bills, to mature on December 19, in 

conjunction with the refunding. The committee also foresaw the 

need for another cash management bill in late November or early 

December to mature after the December tax date. 
The Committee consensus was that the proforma financing plans 

suggested for the October-December period and for January-March 

period seemed appropriate, while adjusting February's 3-year note 

to $18 1/2 billion from $19 billion. 

Inflation -indexed notes 

Deputy Assistant Secretary Anderson provided a brief summary 

of the Treasury's efforts to educate the financial community and 

the general public about the new inflation-indexed note that is 

scheduled to be offered in January. Various Treasury officials 

have spoken and will continue to speak, both domestically and 

abroad, to dealers, financial institutions, mutual and pension 

fund managers, and to professional,membership organizations to 

explain the details of the new issue and to promote the marketing 

and sales of the indexed bonds. Officials have also spoken on a 

number of occasions to different classes of potential investors. 

The Treasury has also contacted consumer-oriented newspaper and 

magazine columnists. 

Committee members noted that a number of investment houses 

have published investor research pieces about the indexed notes, 

and they expect that the number of articles analyzing the notes 

will increase over the next month or so. The dealers have also 

arranged meetings between Treasury officials and various investor 

groups and expect those efforts to continue. 

With respect to the determining the best approach to deciding 

the size of the first auction, the consensus of the committee was 

that it should convene at a later time, after more time has been 

allowed for dealers and other institutions to get a better 

assessment of ultimate investor interest. At that time, the 

committee would have better information on which to make a 

recommendation. The committee did, however, recommend that the 

Treasury consider postponing the settlement of (only) the first 

auction from the 15th to the following week in order to ensure 

better distribution of the new securities in the wake of the 

holiday season. 

It was the consensus of the committee that treating awards at 

bill auctions to the Federal Reserve as add-ons to the amount sold 

to the public would be an improvement in that it would give the 

public better information on the biddable supply. It does not, 

however, address the issue of foreign add-ons which would remain 

in the awards to the public. By contrast, for notes and bonds, 

awards to the Federal Reserve and foreign official institutions 

are both treated as add-ons to the amounts awarded to the public. 

However, because bills are offered on a weekly basis, the 
committee appreciates the difficulty it would entail in 

forecasting cash balances if foreign official awards were to be 

treated as add-ons. It was the consensus of the committee that 

the Treasury consider the idea of obtaining more timely 

information from foreign institutions with respect to their plans 

for participating at T-bill auctions. 

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, except Mssrs. 

Kessenich, Lyski, McKnew, Napoli, pnd Thieke. The Chairman 

presented the Committee report (copy attached) to Under Secretary 

Hawke and Deputy Assistant Secretary Anderson. 

In response to questions, the Committee discussed briefly 

whether the tax treatment.of inflation-indexed notes will be an 

issue affecting investor demand and whether the new indexed notes 

will replace one of the other regularly scheduled notes or bonds. 

Tax treatment of the indexed notes was not viewed,as a deciding 

factor affecting demand by what are considered the potential 

investor classes. Also, the committee expects the indexed notes 

will be a separate class of securities, not necessarily a 

substitute for other currently offered Treasury notes or bonds. 

The meeting adjourned at 9:05 a.m. 

V Paul F. Malvey 

Associate Director 

Office of Market Finance 

Domestic Finance 

October 30, 1996 

Attachments 

Certified by: - - L. J 137 /q Ricriard Kelly, Chairqhn 

Treasury or row in^ *visory Committee 

of the Public Securities Association 

October 30, 1996