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August 2, 2006
HP-37

Assistant Secretary For Financial Institutions
Emil W. Henry, Jr.
August 2006 Quarterly Refunding Statement

We are offering $44.0 billion of Treasury securities to refund approximately $22.4 billion of privately held securities maturing on August 15 and to raise approximately $21.6 billion. The securities are:

• A new 3-year note in the amount of $21.0 billion, maturing August 15, 2009;
• A new 10-year note in the amount of $13.0 billion, maturing August 15, 2016;
• A reopening of the 30-year bond in the amount of $10.0 billion, maturing February 15, 2036.

These securities will be auctioned on a yield basis at 1:00 PM EDT on Monday, August 7; Wednesday, August 9; and Thursday, August 10; respectively.  All of these auctions will settle on Tuesday, August 15.  The balance of our financing requirements will be met with weekly bills, monthly 2-year and 5-year notes, the September 10-year note reopening, and the October 10-year and 5-year TIPS reopenings.  Treasury also is likely to issue cash management bills in early September.

Current Thirty-Year Bond Reopening

The 30-year bond auction in August 2006 will be a reopening regardless of price movements in the bond.  The IRS original issue discount (OID) rules provide that additional Treasury securities have the same terms as the original Treasury securities if they are issued not more than one year after the original Treasury securities were first issued to the public.     

New Thirty-Year Bonds

Treasury will issue 30-year bonds on a quarterly basis beginning in February 2007.  Total bond issuance in 2007 is likely to rise slightly to ensure liquidity in the new issue.

Quarterly issuance will be comprised of two distinct 30-year bond securities. Treasury will auction a 30-year bond in February 2007 and reopen that security in May 2007.  A new 29 ¾ - year bond will be auctioned with accrued interest in August 2007 and reopened in November 2007.  Moving to a quarterly issuance pattern will benefit the STRIPS market by creating interest payments for February, May, August and November.

Treasury Securities Lender of Last Resort (SLLR) Facility White Paper

On April 26, we released a white paper, "Consideration of a Proposed Securities Lending Facility," (available on the Treasury website at http://www.treas.gov/offices/domestic-finance/debt-management/securities-lending-facility_04262006.pdf) that identified some important policy considerations and outlined one of many possible structures for such a facility.  We remind all interested parties that the deadline for submitting comments on this proposal is August 11, 2006.  Following a full review of all submitted responses to this proposal, Treasury will make a determination as to whether or not to proceed with establishing such a facility.

Changes to Restrictions and Reporting on Bidding Procedures

Beginning on December 31, 2006, Treasury will raise the customer confirmation reporting requirement threshold amount from $500 million or more to $750 million or more. 

With the release of our new auction software, anticipated to occur in the spring of 2007, we will report to the public the amount of noncompetitive auction awards 15 minutes prior to the close of competitive bidding. 

Other Policy Matters Under Consideration

We are still considering allowing competitive and non-competitive bids in uniform price auctions (while maintaining the $5 million limit for non-competitive bids).  Please send comments and suggestions on these subjects or others relating to Treasury debt management to debt.management@do.treas.gov. 

The next quarterly refunding announcement will take place on Wednesday, November 1, 2006. 

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