Summary
Earlier this morning, the Treasury announced the outline of its February refunding operation. Next week, Treasury will conduct three auctions totaling $48.0 billion. These will refund approximately $17.3 billion in maturing debt and raise $30.7 billion in new cash.
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The Treasury's February refunding operation will consist of auctions next week of three new issues -- three-, 10- and 30-year maturities -- totaling $48.0 billion. These issues will refund $17.281 billion of publically held debt maturing or called as 2/15 and raise $30.719 billion in new cash.
Next week's refunding operation sees the return of a 30-year bond issue. This will be the first of these since the 5.375s of 2/15/31 were auctioned five years ago.
In addition to the public holdings, Federal Reserve banks hold $2.989 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 February 2005 financing involved the issuance of $51.0 billion in notes. That operation refunded $11.4 billion of maturing debt, while raising $39.6 billion in new cash.
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FEBRUARY 2006 TREASURY REFUNDING OPERATION*
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Auction Amount 02/02 When-
Date (Bils.) Maturity Coupon Issued Yield
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02/07 $21.0 02/15/09 @ NA#
02/08 $13.0 02/15/16 @ NA#
02/09 $14.0 02/15/36 @ NA#
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$48.0
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*To refund $17.281 billion in maturing issues
and raise $30.719 billion in new cash. @Coupon
to be established through auction process.
#At 9:50 AM (ET) on 2/1, the current on-the-
run 3-year, 10-year and 30-year issues (4.375s
of 11/15/08, 4.500s of 11/15/15 and 5.375s of
02/15/31) were trading at respective yields of
4.51%, 4.54% and 4.70%.
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In a press release issued on Monday (1/30), Treasury said the following:
"The Treasury Department announced today that it expects net borrowing of marketable debt to total $188 billion in the January-March 2006 quarter. The estimated cash balance on March 31 is $15 billion. On October 31, Treasury announced estimated net market borrowing of $171 billion this quarter and a March 31 cash balance of $15 billion. Adjusting for a beginning-of-quarter cash balance that was $12 billion higher than estimated in October, the current borrowing estimate is $29 billion higher than previously announced. The increase in anticipated borrowing is primarily the result of higher outlays, including a timing shift from the October-December 2005 quarter, and lower net issues of State and Local Government Series securities. Based on current projections, Treasury continues to believe that the statutory debt limit will be reached in mid-February 2006.
"Treasury also announced that it expects a net pay down in marketable debt of $30 billion in the April-June 2006 quarter. The estimated cash balance on June 30 is $25 billion.
"Treasury borrowed $93 billion in net marketable debt in the October-December 2005 quarter. The cash balance on December 31 was $37 billion. On October 31, Treasury announced estimated net market borrowing of $96 billion and an end-of-quarter cash balance of $25 billion. Adjusting for the higher-than-estimated cash balance at quarter-end, the net market borrowing need was $15 billion lower than announced in October. The improvement was primarily the result of lower outlays and unanticipated repayments of outstanding debt to the IMF."
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