Summary
Earlier today, the Treasury announced the outline of its May refunding operation. Next week, Treasury will conduct three auctions totaling $51.0 billion. These will refund approximately $39.6 billion in maturing debt, and raise $11.4 in new cash. The big news in today's announcement was the possibility Treasury may reinstate a 30-year bond in its auction cycle.
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The Treasury's May refunding operation will consist of auctions next week of three new note issues -- three-, five- and 10-year maturities -- totaling $51.0 billion. These issues will refund roughly $39.6 billion of publically held debt maturing or called as 5/15, and raise $11.4 billion of new cash.
In addition to the public holdings, Federal Reserve banks hold $10.9 billion of maturing issues for their own accounts. The Treasury may refund these through the sale of additional amounts of the new securities.
By comparison, the Treasury's May 2004 financing involved the issuance of $54.0 billion in notes. That operation refunded about $32.8 billion of maturing debt, while raising $21.2 billion in new cash.
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MAY 2005 TREASURY REFUNDING OPERATION*
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Auction Amount 05/04 When-
Date (Bils.) Maturity Coupon Issued Yield
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05/10 $22.0 05/15/08 @ NA#
05/11 $15.0 05/15/10 @ NA#
05/12 $14.0 05/15/15 @ NA#
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$51.0
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*To refund $39.625 billion in maturing issues
and raise $11.375 billion in new cash. @Coupon
to be established through auction process.
#At 11:15 AM (ET) on 5/4, the current on-the-
run 3-year, 5-year and 10-year issues (3.375s
of 2/15/08, 4.000s of 4/15/10 and 4.000s of
2/15/15) were trading at respective yields of
3.70%, 3.89% and 4.22%.
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In this morning' press release, the Treasury announced that it is considering reinstating a 30-year bond in its auction cycle. Following is an excerpt:
"Treasury is considering whether or not to reintroduce regular issuance of a 30-year nominal Treasury bond. A decision on 30-year nominal issuance will be announced at the August 2005 refunding on August 3, 2005.
"We will examine if we have the flexibility to issue 30-year bonds while maintaining deep and liquid markets in our other securities and determine if nominal bond issuance is cost effective. There are two possible outcomes:
* No change in current policy; or
* Semi-annual auctions of a 30-year nominal security
beginning in February 2006."
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