FROM THE OFFICE OF PUBLIC AFFAIRS

The Treasury Department today announced a series of technical changes to the rules that apply to Foreign and International Monetary Authority (FIMA) account participation in Treasury auctions. These changes will facilitate the continued participation of FIMA accounts in the auction process, improve the liquidity and efficiency of the Treasury market, and allow the Treasury to better control the amount of funds raised at auction. These changes have been developed with the cooperation of the Federal Reserve Board and the Federal Reserve Bank of New York, and in consultation with major participants in the FIMA program. The Federal Reserve Bank of New York has already been working with major participants in the FIMA program to implement these new rules.

The Treasury plans to implement the following policy changes with respect to FIMA accounts, which will become effective on February 1, 2001:

• Individual Limits: Individual FIMA accounts will be limited to non-competitive bids of no more than $200 million per account per auction. This limit will apply to both new bids and "rollovers." This limit will be further reduced to $100 million per account per auction beginning January 1, 2002.
• Aggregate Limits: Total non-competitive bids from all FIMA accounts will be limited to $1 billion per auction per security. These will be included in the total amount of the announced auction size. There will no longer be "add-ons" to the auction size for FIMA accounts. Going forward, the publicly announced auction amount will represent the total amount raised from the public. Purchases by the Federal Reserve's System Open Market Account will continue to be issued in addition to the public auction amount.
• Allocation: FIMA account bids will be filled from smallest to largest. A bid that pushes total FIMA bids over the $1 billion limit will be filled up to the aggregate award limit of $1 billion. The remaining amount will be left unfilled. In the event that bids of the same size would cause the limit to be exceeded, these bids will be prorated. All other bids of larger size will be left unfilled.

We anticipate that larger FIMA accounts will participate in the competitive auction, where they will be subject to the same rules as all other competitive bidders. In particular, these rules include the following:

• Limits on competitive awards to a single bidder of no more than 35 percent of the public auction amount (including net long positions).
• Requirements to report net long positions under circumstances described in the Uniform Offering Circular.

Two current restrictions on all non-competitive bidders that also apply to FIMA accounts will continue to apply:

• Entities bidding non-competitively, including FIMA accounts, will continue to be prohibited from bidding competitively for their own account in the same auction; and
• Entities bidding non-competitively, including FIMA accounts, will be prohibited from holding when-issued, futures, or forward positions in the security being auctioned.

The size of our auctions will continue to be driven by Treasury's financing needs. We expect that our publicly announced auction amounts initially will increase by the amount that would have otherwise been anticipated to be raised through the "add-ons" related to FIMA accounts.

Background

FIMA accounts are primarily foreign central banks and governmental monetary entities, and also include non-governmental international monetary entities (such as the World Bank and IMF) and other authorized accounts. Treasury's current policy permits FIMA accounts to bid non-competitively and without limitation as to size in Treasury bill, note and bond auctions. FIMA non-competitive purchases of coupon securities, and portions of FIMA non-competitive purchases of bills, are treated as "add-ons" to Treasury's public auction amounts. This has resulted in significant issuance of Treasury securities above the publicly announced auction amounts.