MINUTES OF THE MEETING OF THE

TREASURY BORROWING ADVISORY COMMITTEE OF 

THE BOND MARKET ASSOCIATION

February 2, 1999 

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. 

Assistant Secretary for Financial Markets Gary Gensler 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). Paul Malvey, Associate Director, Office of Market Finance 

presented the chart show, which had been released to the public on February 1, updating Treasury 

borrowing estimates and historical debt and interest rate statistics. 

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

The Committee reconvened in closed session at the Madison Hotel at 10:25 a.m. All members were 

present. Assistant Secretary Gensler gave the Committee its Charge, which is also attached. 

The Committee began by reviewing a long-term proforma financing schedule for the period ending in 

FY 2005 and a list of suggested debt management objectives, both of which were prepared by 

Committee members and are attached to this report. The discussion revolved around a severalpronged approach to distributing downward adjustments in Treasury borrowing taking continuing 

budget surpluses into consideration. While implementation was not viewed as imminent, this 

approach would reduce the frequency, but not the size of 2-year notes and 30- year bonds, initiate 

buy-backs of outstanding Treasury securities to manage the debt maturity structure flexibly and 

enhance market liquidity, and trim the size of new issues of inflation- indexed notes and bonds. 

The Committee then turned to a discussion of the February refunding and the financing for the 

remainder of the January-March quarter. A proforma financing plan (also attached) for the quarter 

was distributed by a member to facilitate discussion. The Committee decided unanimously to 

recommend a new 5-year note in the amount of $16 billion. A majority of the Committee (15-3) 

voted to recommend reopening the outstanding 4-3/4% Treasury note of 11/15/08. The Committee 

was evenly divided regarding reopening the 5-1/4% Treasury bond of 11/15/28. Those who favored 

reopening the bond recommend an amount of $8 billion and a new 10-year note in an amount of $12 

billion. Those who favored a new 30-year bond recommend issuing $10 billion of bonds maturing on 

February 15, 2029 and reopening the 4- 3/4% note in an amount of $10 billion. 
In the course of the discussion on whether to reopening, one committee member raised an issue 

regarding the application of the 35 percent rule in such cases. Currently, any one bidder in an auction 

is allowed to take down up to 35 percent, including the bidder's net long position in the security going 

into the auction. In the case of a reopening, the holdings of the outstanding issue are also included in a 

bidder's net long position, while the 35 percent limit is only based on the size of the reopened auction. 

The recommendation of the member is to include only the net long position in the WI market for the 

reopened security for purposes of the 35 percent rule. 

By consensus, the Committee decided to recommend that the Treasury follow the January-March and 

April-June financing plans in the proformas, except with adjustments to the auction sizes in the to 

reflect the Committee's recommendations regarding the February refunding. The proformas did not 

include the social security trust funds investments in private securities in the February-June period. 

The meeting adjourned at 12:20 p.m. 

The Committee reconvened at the Madison Hotel at 6:15 p.m. All members were present. The 

Chairman presented the Committee report to Fiscal Assistant Secretary Hammond. There we no 

questions. 

The meeting adjourned at 6:30 p.m. 

Jill K. Ouseley, Director 

Office of Market Finance 

February 2, 1999 

Attachments 

Certified by: 

Stephen Thieke, Chairman 

Treasury Borrowing Advisory Committee 

of the Bond Market Association 

February 3, 1999
Federal Register / Vol. 64, No. 10 / Friday, January 15, 1999 / Notices 

DEPARTMENT OF THE TREASURY 

DEPARTMENTAL OFFICES 

DEBT MANAGEMENT ADVISORY 

COMMITTEE MEETING 

Notice is hereby given, pursuant to 5 U.S.C. App. §10(a)(2), that a meeting will be held at the U.S. 

Treasury Department, 15th and Pennsylvania Avenue, N.W., Washington, D.C., on February 2, 1999, 

of the following debt management advisory committee: 

The Bond Market Trade Association 

Treasury Borrowing Advisory Committee 

The agenda for the meeting provides for a technical background briefing by Treasury staff, followed 

by a charge by the Secretary of the Treasury or his designate that the committee discuss particular 

issues, and a working session. Following the working session, the committee will present a written 

report of its recommendations. 

The background briefing by Treasury staff will be held at 9:00 a.m. Eastern time and will be open to 

the public. The remaining sessions and the committee's reporting session will be closed to the public, 

pursuant to 5 U.S.C. App. §10(d). 

This notice shall constitute my determination, pursuant to the authority placed in heads of 

departments by 5 U.S.C. App. §10(d) and vested in me by Treasury Department Order No. 101-05, 

that the closed portions of the meeting are concerned with information that is exempt from disclosure 

under 5 U.S.C. §552b(c)(9)(A). The public interest requires that such meetings be closed to the public 

because the Treasury Department requires frank and full advice from representatives of the financial 

community prior to making its final decision on major financing operations. Historically, this advice 

has been offered by debt management advisory committees established by the several major segments 

of the financial community. When so utilized, such a committee is recognized to be an advisory 

committee under 5 U.S.C. App. §3. 

Although the Treasury's final announcement of financing plans may not reflect the recommendations 

provided in reports of the advisory committee, premature disclosure of the committee's deliberations 

and reports would be likely to lead to significant financial speculation in the securities market. Thus, 

these meetings fall within the exemption covered by 5 U.S.C. §552b(c)(9)(A). 

The Office of the Assistant Secretary for Financial Markets is responsible for maintaining records of 

debt management advisory committee meetings and for providing annual reports setting forth a 

summary of committee activities and such other matters as may be informative to the public 

consistent with the policy of 5 U.S.C. §552b. 

Gary Gensler 

Assistant Secretary 

(Financial Markets) 

Date: January 11, 1999 
Treasury Borrowing Advisory Committee 

of the Public Securities Association 

Chairman 

Stephen Thieke

Chairman, Market Risk Committee

JP Morgan & Company, Inc

60 Wall Street, 20th Floor

New York, NY 10260

Vice Chairman 

Kenneth M. DeRegt

Managing Director

Morgan Stanley & Co., Incorporated

Daniel S. Ahearn

President

Capital Markets Strategies Co.

50 Congress Street, Ste. 816

Boston, MA 02109

James R. Capra

President

Capra Asset Management, Inc.

555 Theodore Fremd Avenue Ste. 

C-204

Rye, NY 10580

Stephen C. Francis

Vice Chairman

Fischer, Francis, Trees & Watts, 

Inc.

200 Park Avenue

New York, NY 10166

Lisa W. Hess

Managing Director

Zesiger Capital Group LLC

320 Park Avenue

New York, NY 10022

Gedale B. Horowitz

Senior Managing Director

Salomon Smith Barney

388 Greenwich Street, 39th Fl.

New York, NY 10013-2396

Timothy W. Jay

Managing Director

Lehman Government Securities, 

Inc.

1 Broadgate, 3rd Floor

London EC2M 7HA England

February 2, 1999 

1585 Broadway

New York, NY 10036

Thomas L. Kalaris

President

Barclays Capital Inc.

222 Broadway

New York, NY 10038

Barbara Kenworthy

Managing Director of

Mutual Funds - Taxable

Prudential Insurance

McCarter Highway

2 Gateway Center, 7th Floor

Newark, NJ 07102-5029

Wayne D. Lyski

Chairman & Chief Investment 

Officer

Alliance Fixed Income Investors

Alliance Capital

Management Corporation

1345 Avenue of the Americas

New York, NY 10105

Robert D. McKnew

Executive Vice President

Bank of America

1455 Market Street, 5th Floor

San Francisco, CA 94103

Michael P. Mortara

Partner, Co-head, Fixed Income 

Division

Goldman-Sachs & Co.

85 Broad Street, 26th Floor

New York, NY 10004

William H. Pike

Managing Director

Chase Securities Inc.

270 Park Avenue

New York, NY 10017

Joseph Rosenberg

President

Lawton General Corporation

667 Madison Avenue

New York, NY 10021-8087

William D. Shaw, Jr.

President

Aubrey G. Lanston & Co. Inc.

One Chase Manhattan Plaza, 53rd 

Floor

New York, NY 10005

Morgan B. Stark

Principal

Ramius Capital Group

757 Third Avenue, 27th Floor

New York, NY 10017

Craig M. Wardlaw

Executive Vice President

Nations Bank Corporation

Nations Bank Corporate Center

Mail Code NCI 007-0606

Charlotte, NC 28255-0001

Charles D. White

Senior Vice President

Wells Fargo

Northwest Center

Sixth and Marquett

Minneapolis, MN 55479-0163
COMMITTEE CHARGE 

The Treasury would like the Committee's specific advice on the following: 

General Topics 

• Current forecasts predict growing budget surpluses. If the President's proposals are 

adopted, the debt held by the public in 2014 is projected to be the lowest since World 

War I as a percent of GDP. What are the possible implications of this for Treasury debt 

management over the longer term? What are the implications for Treasury debt 

management over the next two years? 

• Given that the realization of long run-forecasts such as these is dependent upon future 

economic, budget and political behavior, what are the implications for Treasury debt 

management over the next two years? 

• Any other general topics related to the Treasury debt management program. 

Treasury financing 

• The composition of a financing to refund approximately $27.0 billion of privately held 

notes maturing on February 15 and to raise approximately $8 to $10 billion of cash in 5­

and 10-year notes and 30-year bonds. Does the Committee recommend any reopenings? 

• If we were to reduce the size of this refunding, how would you recommend doing so? 

• The composition of Treasury marketable financing for the remainder of January-March 

quarter, including cash management bills to mature in April. 

• The composition of Treasury marketable financing for the April-June quarter. 

I Debt management objectives in an environment of extended fiscal surplus 

1. Seek the lowest long run expected interest cost consistent with low risk (uncertainty) relative to 

the expectation: 

2. Maintain flexibility to respond to changes arising from fiscal policy actions and uncertain 

economic developments: 

3. Preserve, to the extent practical, the liquidity of the key maturity segments of the Treasury bill 

and coupon markets: 

4. Provide transparency and predictability in order to limit the direct and indirect costs of 

disruptive shifts in Treasury financing plans. 

II Additional Considerations 

• Use market based, rather than government budget scoring, methods to evaluated the costs 

of various debt retirement techniques. 

• Scale annual specialized instrument issuance (tips) relative to the expected size of annual 

benchmark coupon issuance, rather than the share of outstanding debt.