PO-527
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.
4-Week Bill
Yesterday, Treasury conducted its first auction of 4-week bills. We are pleased with the results of the first auction, which raised $10 billion, and we believe that these securities will become an important part of Treasury's ongoing debt management strategy. Regular weekly offerings of 4-week bills will help to smooth seasonal fluctuations in Treasury's cash balances and reduce reliance on cash management bills.
Federal Register Notice on Net Long Position and the 35 Percent Rule
On July 23, the Treasury announced the publication in the Federal Register of an Advance Notice of Proposed Rulemaking that solicits public comments on potential modifications to the calculation of the net long position (NLP) and the 35 percent award limit in marketable Treasury securities auctions. Treasury invites comments on alternatives to NLP reporting and the 35 percent award limit. Of particular interest are comments on an alternative which would permit bidders in re-openings to exclude a portion of their current holdings of the security being auctioned from their NLP calculation. We look forward to receiving comments from market participants on this issue.
Debt Buybacks
Since our last quarterly refunding announcement in May, we have successfully completed our buyback operations for the April-June quarter, purchasing $10 billion par amount of securities. We continue to be pleased with the results of our buyback operations.
In May we announced that we expect to conduct buybacks in the current July-September quarter of approximately $10 billion par amount. We now expect to decrease slightly the amount of buybacks this quarter to approximately $9 billion.
Additionally, today we are announcing that we expect to conduct buybacks of approximately $9 billion par amount of securities in the upcoming October-December quarter.
Terms of the August Refunding
I will now turn to the terms of the August Refunding. We are offering $27 billion of notes and bonds to refund approximately $12 billion of privately held notes and bonds maturing on August 15, raising approximately $15 billion. The securities are:
- A re-opening of the 4 5/8% 5-year note issued in May 2001, maturing May 15, 2006 in the amount of $11 billion.
- A 10-year note in the amount of $11 billion, maturing August 15, 2011.
- A re-opening of the 5 3/8% 30-year bond issued in February 2001, maturing February 15, 2031, in the amount of $5 billion.
These securities will be auctioned on a yield basis at 1:00 pm eastern time on Tuesday, August 7, Wednesday, August 8, and Thursday, August 9, respectively.
As announced on Monday, we estimate that we will have a $55 billion cash balance on September 30 and a $30 billion cash balance on December 31.
In keeping with Treasury's traditional practice, we will continue to announce any changes to our debt management policy at our quarterly refunding press conferences. Our next quarterly refunding announcement will take place on Wednesday, October 31.