FROM THE OFFICE OF PUBLIC AFFAIRS

Good morning. Thank you for coming. I am pleased to report on the progress of Treasury’s indexed securities program and to discuss continued plans for it. In January of this year, following extensive internal analysis and a long period of consultations with market participants, Treasury introduced a new form of funding for the government in the form of inflation-indexed securities. These securities offer a return that is indexed to the consumer price index. In introducing these securities our goals were to provide an instrument that would offer guaranteed future purchasing power to American savers, to reduce and make more stable government’s funding costs and to spur development of the capital markets. We have been pleased with the market response. In January, we auctioned $7 billion in securities and in May we sold an additional $8 billion for a total of $15 billion in ten year inflation-indexed notes, maturing in January of 2007. A liquid market has developed with bid-asked spreads comparable to those of off-the-run Treasury securities. More than $2 billion of follow-on issuance has taken place by government agencies, corporations and municipal issuers. At least five mutual fund companies have offered products based on indexed securities, and there has also been interest from insurance companies and pension funds.

The success of our first issue demonstrates the strong demand for this product. But, as we announced at the outset, this is a long term project and a long-term commitment that is still in its opening stages. When we launched this program, we announced that we would introduce new series with new maturities in the future. And today, I would like to describe the offerings we have planned for the immediate future.

In July, we will offer our first inflation indexed securities with a five year maturity. They will come due in July 2002.

In October, we expect to re-open this issue and again offer July 2002 securities.

Next January, we expect to offer a new 10-year indexed note.

Also during next year, we will offer a 30-year inflation indexed bond.

And by the end of next year, we expect to establish a regular schedule for offering inflation-indexed securities with maturities of five, ten and thirty years.

These new maturities and our commitment to move toward a regular schedule for offering a mix of maturities are important steps in the development of this program.

A further development is that due to the falling level of the deficit which is expected to drop below $100 billion this year as well as the growth of the inflation-indexed security program, we will cease offering conventional ten year notes in the months of July and October, effective immediately.

I would now be happy to answer any questions you may have.