PO-15
Good morning. I am pleased to be with you today to discuss the government's refunding needs for the current quarter. In addition, I will be making a few announcements with respect to other aspects of Treasury's debt management.
52-Week Bills
One year ago, Treasury announced a reduction in the frequency of issuance of 52-week Treasury bills from monthly to quarterly, consistent with the recommendation of the Treasury's Borrowing Advisory Committee. This change has allowed us to add to the liquidity of the three- and six-month bills while we respond to the overall reduction in Treasury's borrowing needs.
Since then, we have worked with Congress to enact legislation that will help to ensure a smooth transition to the elimination of this security. These statutory changes, which replace references to the auction yield of 52-week bills with the one-year Constant Maturity Treasury (CMT) yield, were enacted at the end of the 106 th Congress. I would like to take this opportunity to thank those who devoted their time and effort to this issue, both within the Treasury and in Congress.
Today we are announcing the elimination of the 52-week Treasury bill. The final auction of this security will take place on February 27, 2001. This change will eliminate roughly $20 billion in debt issuance this fiscal year. We expect that a portion of this amount will be re-allocated elsewhere in the bill sector, consistent with our borrowing needs.
Buybacks
Since our last quarterly refunding announcement, we have successfully completed our buyback operations for calendar year 2000 and have begun our operations for calendar year 2001. Total buybacks for 2000 reached our stated goal of $30 billion par amount of securities. We continue to be pleased with the results of our buyback operations.
As we announced at our last quarterly refunding in November, we will provide our buyback goals going forward on a quarterly basis. In November, we indicated that we expect to conduct buyback operations of approximately $9 billion par amount of securities in the January to March quarter. Today we are announcing that we expect to conduct buyback operations for approximately $9 billion of securities in the April to June quarter as well.
FIMA Adjustments
On November 14, Treasury 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, which will become effective on February 1, 2001, are designed to 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.
As announced in November, individual FIMA accounts will be limited to non-competitive bids of no more than $200 million per account per auction, which will apply to both new bids and "roll-overs." In addition, total non-competitive bids from all FIMA accounts will be limited to $1 billion per auction, per security, which will be included in the total amount of the announced auction size. Allocation of FIMA non-competitive bids will be from smallest to largest, up to the aggregate award limit of $1 billion.
At the time we stated that we expected to increase our publicly announced auction amounts initially by the amount that we otherwise would have expected to raise through the "add-ons" related to FIMA accounts. As a result, we will increase the size of our 5- and 10-year note auctions by $1 billion per auction.
Terms of the February Refunding
I will now turn to the terms of the February Refunding. We are offering $32 billion of notes and bonds to refund approximately $25.1 billion of privately held notes maturing on February 15, raising approximately $6.9 billion. The securities are:
- A re-opening of the 5 3/4 percent 5-year notes issued in November 2000, maturing November 15, 2005, in an amount of $11 billion.
- A 10-year note in an amount of $11 billion, maturing February 15, 2011.
- A 30-year bond in an amount of $10 billion, maturing February 15, 2031.
These securities will be auctioned on a yield basis at 1:00 PM Eastern Standard Time on February 6, 7, and 8, respectively.
With respect to the re-opening of the 5-year note, it should be noted that this security currently trades at a premium to par. This is of particular significance to small bidders in the auction, especially those who are participants in the TreasuryDirect system, who should be aware that additional funds may be required to cover the cost of the premium. In addition to possible premium, investors will be required to pay three months of accrued interest.
As announced on Monday, we estimate that we will have a $45 billion cash balance on March 31 and a $60 billion cash balance on June 30. We expect to issue cash management bills this quarter to bridge seasonal low points in our cash position.
Our next quarterly refunding announcement will take place on Wednesday, May 2.