FROM THE OFFICE OF PUBLIC AFFAIRS

There will be no change in the issuance calendar this quarter. Treasury has made substantial changes in issuance over recent quarters, diversifying our portfolio by reintroducing a 3-year note, increasing the frequency of 5-year note and 10-year TIPS issuance, and regularly reopening 10-year notes. These adjustments to the financing schedule have occurred in conjunction with an increase in our expected borrowing needs over the coming quarters. The financing changes that Treasury has already put in place have created additional capacity to accommodate the anticipated increase in issuance and flexibility to meet most unexpected swings in borrowing needs.

For this quarterly refunding, we are offering $60 billion of notes to refund approximately $43.7 billion of privately held notes and bonds maturing on August 15, raising approximately $16.3 billion. The securities are:

1. A new 3-year note in the amount of $24 billion, maturing August 15, 2006.
2. A new 5-year note in the amount of $18 billion, maturing August 15, 2008.
3. A new 10-year note in the amount of $18 billion, maturing August 15, 2013.

These securities will be auctioned on a yield basis at 1:00 p.m. Eastern time on Tuesday, August 5, Wednesday, August 6, and Thursday, August 7, respectively. The balance of our financing requirements will be met through the monthly issuance of 5-year notes, the 10-year note reopening and 10-year TIPS reopening, and 2-year note and bill offerings. The Treasury is likely to issue cash management bills in early September and October.

As we announced in the May quarterly statement, the Treasury will begin issuing 5-year notes on the 15th of each month starting in August. Treasury will also begin regular reopenings of 10-year notes on the 15th of the month following the traditional refunding, with the first 10-year reopening settling on September 15th.

Two-Minute Auctions
We are pleased to announce that effective next Monday, August 4th, Treasury will begin releasing auction results in two minutes (with a variance of +/- 30 seconds). As you know, Treasury has recently been working on improving the efficiency of the primary market for Treasury securities by reducing the time it takes to release auction results. Improvements in the auction process will generate long term savings to the taxpayer by reducing uncertainty that bidders bear and lowering the risk premium they charge Treasury in each auction. Achieving a two-minute auction has required significant technological and procedural changes, and is the result of exceptional cooperation between primary dealers and other auction participants, the Bureau of Public Debt, the Federal Reserve Bank of New York, and the press.

Change to Note Auction Schedule
Treasury will adjust its note auction schedule to avoid coinciding with FOMC announcements. The changes will reduce the uncertainty auction participants face when note auction dates fall on FOMC announcement dates. These changes will be shown in the calendars we release each quarter as part of the quarterly refunding process. These changes are being undertaken due to the significance of FOMC announcements. We do not anticipate making calendar changes for any other information releases.

Policy Issues under Discussion
The Treasury recognizes the need to have contingency plans in place for the primary market in order to respond to potential auction disruptions. Last quarter, we solicited comments from market participants on circumstances they believe would lead to an auction delay and factors we should consider when deciding whether or not to postpone an auction. This quarter we presented several possible responses to different scenarios that would likely result in a delayed auction close or a rescheduled auction. We have asked for feedback on these possible responses in an effort to refine our contingency plans further, and will continue to consult with market participants about the most suitable course of action to take.

Please send comments and suggestions on these subjects or others relating to debt management to debt.management@do.treas.gov.