MINUTES OF THE MEETING OF THE 

TREASURY BORROWING ADVISORY COMMITTEE 

OF THE PUBLIC SECURITIES ASSOCIATION 

NOVEMBER 1 AND 2, 1994 

November 1 

The Committee convened at 11:35 a.m. at the Treasury 

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

public. Members present were Chairman Francis, Vice Chairman 

Kelly, Messrs. Ahearn, Capra, Corzine, and deRegt, Ms. Kenworthy, 

and Messrs. Lakefield, Lodge, Pike, Roberts, Rosenberg, Stark, 

Thieke, and Wardlaw. The Federal Reaister 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 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 October 31, 1994. 

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

The Committee reconvened in closed session at the Madison 

Hotel at 2:10 p.m. The members listed above, Ms. Bradbury, and 

Ms. Ouseley were present. Ms. Bradbury gave the Committee its 

Charge, which is also attached. The Committee first discussed 

the size of the November midquarter refunding within the context 

of the Treasury's estimate of a $59.6 billion net market 

borrowing requirement during the October-December 1994 quarter. 

A draft proforma that had been prepared by a member of the 

Committee (attached) was used during the discussion. 

The Committee discussed recommending that the November 

refunding consist of $17 billion of 3-year notes, 

$12-112 billion of 10-year notes, and $15 billion of 37-day cash 

management bills. The members voted unanimously for this 

recommendation, which would raise $0.7 billion in regular 

midquarter refunding issues and temporarily raise $15 billion 

until after the December 15 tax date. The Committee also 

believed that another CMB might be necessary in early December 

and agreed by consensus that, if needed, the bill should mature 

after the January 15 tax date. The Committee consensus was that 

the current issue sizes would raise the remaining cash needed in 

the fourth calendar quarter. 

The Committee reviewed the Treasury's draft of Treasury 

auction calendars for November through January. They agreed by 

consensus to recommend: (1) that the CMB to be issued in the 
refunding be auctioned on November 10, ahead of the 52-week bill 

auction; (2) that the November 2-year be auctioned on Monday, 

November 21, ahead of the regular weekly bill auction, and that 

the 5-year note be auctioned on Tuesday, November 22 at 1:00 

p.m.; and (3) that the December 2- and 5-year note auctions be 

announced on December 14 and auctioned on December 21 and 22, 

respectively. 

The consensus was that the questions in the Charge 

pertaining to a longer term look at Treasury borrowing 

requirements needed to be addressed before a specific financing 

plan could be recommended for the January-March quarter. The 

Committee agreed to recommend cash balances of $30 billion on 

December 31 and $20 billion on March 31. 

The Committee did not recommend a specific financing plan 

for the January-March quarter. 

Lonser ~ers~ective on Treasurv borrowinq 

The Committee decided by consensus to link the two questions 

in the Charge pertaining to the appropriate mix of Treasury bill 

and coupon issues in 1995 and beyond and pertaining to the 

frequency of 3-year note issuance. The Committee consensus was 

that issuance of cash management bills, rather than an increase 

the frequency of 3-year notes, is the appropriate approach to 

smoothing levels of the Treasury cash balance at midmonth. 

Ms. Bradbury indicated to the Committee that, even with the 

decreasing deficit, if all coupon issues were held constant in 

FY 1995, the amount raised in the bill sector would need to grow 

somewhat. Looking ahead into FY 1996, Ms. Bradbury indicated 

that coupon issues would need to grow and/or new securities would 

be needed to avoid an inordinate increase in bill issue sizes. 

This outcome would result in part from the lower amount of cash 

that would be raised in 5-year notes beginning in January 1996, 

when monthly 5-year notes begin to mature. 

The Committee set out three potential financing paths in 

order to focus the discussion: (A) reduce the sizes of coupon 

issues in FY 1995 to reflect the reduction in the size of the 

deficit and increase bill issues commensurately; (B) hold coupon 

issue sizes at the current level in FY 1995 and raise the rest in 

bills; and (C) raise coupon and bill issue sizes in FY 1995 by 

moderate amounts with an eye toward avoiding an inordinate 

increase in the proportion of new cash raised in bills. There 

were 11 votes for recommending path (C) , 3 for path (B) and none 

for path (A) . 

The meeting adjourned at 4:10 p.m. 
November 2 

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

closed session. The 14 members who attended the November 1 

meeting were present. The Chairman presented the Committee 

report (copy attached) to Deputy Secretary Frank N. Newman and 

Deputy Assistant Secretary Bradbury. 

A question-and-answer period followed the reading of the 

Committee report. Some Committee members expressed reservations 

about increasing the frequency of 3-year notes to six times per 

year from the current four times, as a way to smooth Treasury 

cash balances. In the past, Treasury bills have been used for 

that purpose. In reply to a question, several members expressed 

views on whether issuance of inflation-indexed bonds would be an 

efficient debt management technique for the Treasury. 

The meeting adjourned at 9:30 a.m. 

Domestic Finance 

November 2, 1994 

Attachments 

Certified by: 

Treasury Borrowing Advisory Committee 

of the Public Securities Association 

November 2, 1994