MINUTES OF THE MEETING OF THE 

TREASURY BORROWING ADVISORY COMMITTEE 

OF THE PUBLIC SECURITIES ASSOCIATION 

NOVEMBER 2 AND 3, 1992 

November 2 

The Committee convened at 10:OO a.m. at the Treasury 

Department. All members were present (see the attached list). 

I gave the Committee an informational background briefing 

updating Treasury borrowing estimates and historical information 

relevant to the November mid-quarter refunding. The borrowing 

estimates and background information had been released to the 

public on October 30, 1992. 

The Committee also received a briefing by a Treasury staff 

member on current economic conditions, which was followed by a 

question-and-answer period. Under Secretary Powell then 

"chargedl1 the Committee to make recommendations on the November 

Treasury refunding and related matters (see the attached Charge). 

The meeting adjourned at 11:lO a.m. 

The Committee reconvened at 1:00 p.m. at the Madison Hotel. 

All members were present. The Committeels discussion began with 

a proposal, which was unanimously adopted, to recommend a 

refunding package totaling $37.0 billion. 

The Committee then turned to the sizes of the issues to be 

offered in the refunding and decided unanimously to recommend 

that the Treasury offer $15.25 billion of 3-year notes, $11.75 

billion of 10-year notes, and $10.0 billion of 30-year bonds. 

These amounts compare with $15.0 billion of 3-year notes, $11.0 

billion of 10-year notes and $10.0 billion of 30-year bonds sold 

in the August 1992 refunding. 

The question of reopening was then addressed. The Committee 

was unanimous in recommending that the Treasury reopen 10- and 

30-year securities whenever possible in order to enhance the 

market liquidity of Treasury issues. The Committee, by a vote of 

17 to 2 recommended reopening the 7-1/4% bond of August 15, 2022. 

The Committee voted to reopen the 6-3/8% note of August 15, 

2002 by a vote of 11 to 8. At the time of the meeting, the note 

was trading at 96.50 (in decimals), which was below the original 

issue discount limit of 97.751 (in decimals). But under IRS 

Notice 92-13 released in March 1992, the tax treatment of the 

additional amount of the 6-3/8s would be the same as the tax 

treatment of the outstanding 6-3/8s (that is, original issue 

discount would not apply), if the Treasury determines that the 

reopening is to alleviate an acute, protracted shortage of that 

security. 
The Committee referred to the criteria suggested in the 

Committeels report to the Treasury in March 1992 to determine 

whether there existed an acute and protracted shortage of the 

6-3/8s. The Committeels criteria are: that the borrowing rate 

for the security in the collateral market be significantly lower 

than general collateral rates for similar securities; that the 

security trade notably lower in yield than issues of similar 

maturity; that the above two conditions exist for a significant 

period, such as two weeks or so; that there be a reduction in 

secondary market trading volume; and that there be evidence of a 

concentration of ownership. The Committee voted by a narrow 

margin that market conditions in the 6-3/8s met the Committee's 

criteria in an a way that warranted a recommendation to reopen. 

The Committee recommended, by consensus, additions to 

regular marketable issues and cash management bills to raise 

needed cash over the rest of the October-December quarter. The 

Committee consensus was that a $30 billion cash balance is 

appropriate on December 31, 1992. By consensus, the Committee 

also suggested that the Treasury can meet its market borrowing 

requirement in the January-March 1993 quarter by adding 

marginally to the sizes of regular issues and decided that a $20 

billion balance is appropriate on March 31, 1993. 

The Committee believed that it is too early to determine 

whether the Treasury's experiment with single-price auctions has 

been successful. In order to provide a fair test of the auction 

procedure, the Committee agreed, by consensus, to encourage the 

Treasury to continue the experiment for the full 1-year period 

that was announced by the Treasury in September 1992. 

The meeting adjourned at 2:45 p.m. 

November 3 

The Committee reconvened at 9:00 a.m. at the Treasury. All 

members were present, except Mr. McKnew. The Chairman presented 

the Committee report to Under Secretary Powell, Assistant 

Secretary Dugan, and Deputy Assistant Secretary Danker. There 

was a question-and-answer period related to the recommendations. 

The meeting adjourned at 9:40 a.m. 

Attachments 

Mill K. Ouseley, Director 

Office of Market Finance 

Domestic Finance 

November 4, 1992